Category Archives: Procurement News

What Do We Really Mean When We Talk ‘Talent’ In Procurement?

Depending with whom you speak, you get very different views on the subject of talent in procurement.

What do we mean when we talk 'talent' in procurement?

 

When we say talent, we don’t mean the ability to sing, dance or unicycle down the street whilst juggling flaming swords (although that would be a useful skill to have…), but having the skills and knowledge necessary to cope with the expanding role of procurement in organisations.

In some sections of the procurement profession, authors and business leaders believe that procurement is ‘doomed’, with procurement struggling to attract the right, talented individuals into the profession, while simultaneously limiting itself by not developing the right skill sets to deal with the changing role.

On the other side, some business leaders believe that the next generation is key and that, with a bit of effort, procurement can turn this around and attract the key talent it requires. By using social media, CPOs can understand how to stay ahead of the game and attract good procurement professionals, while strides can also be made by investing time and effort at university level students.

The Bad News

Spend Matters Editor, Jason Busch, argues that procurement skill sets are not changing with the times, or at least not changing as quickly as the skill sets in other parts of the organisation. A further argument is that the people who you have in procurement now, are not necessarily the people you need to take the profession that next step.

It has been widely quoted that 70 per cent of companies in the UK feel they have a shortage of skilled staff. The story is the same across the world, with similar results being posted in Australia and North America.

CPOs are expecting and demanding more from their teams, but have concerns that individuals are missing the crucial skills required for success. Among the ‘missing’ skills are some biggies too:

  • Negotiation
  • Stakeholder Engagement
  • Strategic Thinking
  • Adopting of Technological Enablers

However, for some, the issue is being able to combine all the basic procurement skills with subject matter expertise, something that is becoming less common in an age where the workforce is more mobile and less likely to stay in one place for an extended period of time.

What’s the Problem?

For a while now, associations such as CIPS and ISM, and organisations like Procurious, have been trying to change the perception of procurement as a career. However, old attitudes and perceptions are proving hard to shift.

The next generation coming through education now are looking at procurement and not seeing the potential for advancement and a perceived limited career path is dulling the attraction. It’s only recently that procurement or supply chain heads are taking up executive positions at major organisations in the public eye (think Tim Cook at Apple).

Financial compensation at the top level of the profession is also not keeping with pace with other functions. While CFO compensation has gone up by double digits on average each year, in some cases CPOs have been lucky to see a 3% to 4% increase.

The Good News

If that all sounds pretty bleak, there is light at the end of the tunnel. In the first 6 months of 2015, organisations have been making very public efforts to attract new talent and showcase procurement.

The UK Government has launched a new public sector procurement apprenticeship scheme, highlighting the experience to be gained working on high profile, high-value projects that affect millions of people. You can find out more about the scheme here.

Other organisations, like NHS Procurement and Skills Development Scotland, are actively working with universities, realising that by recruiting these fresh minds, they are also accessing a valuable source of innovation, new strategic viewpoints and thought processes.

How to Do It

There’s no sure-fire way of attracting the ‘right’ talent to your organisation as different people always look for different things. But we’ve pulled together some good tips for you to think about:

  • What is Procurement? – Define it well, offer prospects, tell the wavering students why this is a great opportunity
  • Pass on Skills – Around 60 per cent of procurement uses mentorship; ensure that skills are passed on and not lost
  • Professional Development – A big one for the ‘millennial’ generation, but critical for helping to retain talent too
  • Interesting Roles – Being able to be mobile, work on different projects and gain experience across the function
  • Grow Talent – Make sure you hire the right people. Assess things like cultural fit and personal values
  • Social Media – Don’t underestimate the power of social media and learn how it can benefit you

Procurious founder Tania Seary is travelling through Australasia in the next few weeks and will talk about procurement talent. Why not let us know if Tania is visiting your organisations, or contact us if you’d like to get her to come and talk to you.

Meanwhile, here are the big news headlines that should be catching your eye in procurement and supply chain this week.

Key takeaways from George Osbornes’s summer Budget

  • The government announced plans for a new apprenticeship levy, which would be paid by all “large employers”. Eddie Tuttle, senior policy and public affairs manager at the CIOB, said: “The government has set itself an ambitious target of delivering 3 million apprenticeships over the next five years – equivalent to 600,000 new apprenticeships a year. The introduction of a new apprenticeship levy is a big ask for business, but one that recognises the acute skills shortages industries such as construction will face in the future unless significant investment is made in training. And if the government is to deliver on its ambitions, more needs to be done to promote construction as a viable career path.
  • An increase in the national minimum wage, now branded the “National Living Wage” that will rise to £9 by 2020, should help some low paid workers. Iain McIlwee, chief executive of the British Woodworking Federation, says: “And looking at the direct impact on SMEs in the construction supply chain, while an increase in the minimum wage for the lowest paid is welcome, we cannot ignore the fact that such increases have a knock-on effect throughout a business, creating inflation in a firm’s total wage bill.“Our latest State of Trade survey among Britain’s joinery manufacturing firms already reveals that 73 per cent of respondents had seen a sharp increase in labour costs, and this is fast becoming a constraint on business.
  • The government is inviting bids for a new round of Enterprise Zones, which will encourage towns and districts to work with local enterprise partnerships to develop bids.
  • And finally: Public sector pay will increase by 1 per cent a year for four years from 2016-17.

Read more at Construction Manager

Nordic report calls for less fast fashion

  • A new report which has mapped out a more sustainable road-map for the Nordic textile industries recommends that replacing fast fashion, reducing resource inputs and encouraging local sourcing should become key priorities.
  • The report was commissioned by the Nordic Council of Ministers and includes work from the National Institute for Consumer Research, the Sustainable Fashion Academy, the Nordic Fashion Association/nicefashion.org, the Swedish Environmental Research Institute and the Copenhagen Resource Institute.

Read more at Ecotextile [subscription site]

India’s Snapdeal to invest $200m in strengthening supply chain services

  • India’s largest online marketplace, Snapdeal, is planning to invest around $200m in bolstering its supply chain services including warehousing, logistics and training and sale assistance.
  • The company aims to be able to host around 1 million sellers over the next three years.
  • In March, Snapdeal had acquired a 20 per cent stake in Gojavas that helps it with last-mile delivery. Following the acquisition, Snapdeal had committed to invest between $150 and $200m over the next one year in logistics and supply chain.

Read more at LBR

What I Learnt At The Social Enterprise World Forum

Social Enterprise World Forum (SEWF)

Last week I attended Social Enterprise World Forum (SEWF) 2015 in Milan, Italy. It has been described by some as the “Davos meeting” of the Social Economy.

Procurious asked whether I’d like to report on my experience for the community – how could I not accept? It brings me great pleasure to present you with some interesting  takeaways through my seasoned CPO’s eyes:

First of all, a bit of background…

Social Economy in the European Union counts as 10 per cent of the European economy (GDP) and represents more than 11 million workers (4.5 per cent of the active EU population).

Social Entrepreneurship is 7.5 per cent of the active population in Finland, 5.7 per cent in UK, 5.4 per cent in Slovenia, 4.1 per cent in Belgium, 3.3 per cent in Italy, 3.1 per cent in France, etc.

Basically, the main objective of Social Businesses is to generate a significant impact on society, the environment and the local community.

Indeed Social Enterprises contribute to smart growth by responding with Social Innovation to needs that have not yet been met.

They also create sustainable growth by taking into account their environmental impact and by a long-term vision. For example Social Enterprises often develop efficient ways to reduce emissions and waste or use of natural resources.

They are the heart of inclusive growth due to their emphasis on people and social cohesion.

During the three day event the sessions with key expert speakers (movement leaders, policy makers, investors, entrepreneurs) covered several topics linked to social entrepreneurship such as Innovation, Social Impact, Impact Investment, Inclusion, Welfare, Social Justice, Environmental Sustainability and the Sharing Economy.

Besides GDP, the “Social Progress Index” is often talked about. This is a real way to measure the social impact and the “Value” generated across a country.

I realised, better now it had been confirmed to me, this is really a new growing “world” that has the potential to have an impact on Procurement and Supply Chain too.

Social Businesses can offer a wide range of products and services, not only to serve consumers  and public sector, but also to profit companies. 

In fact if we look at the potential products and services provided by the Social Enterprises (as well as their level of quality and competitiveness), profit companies should seriously consider to explore and buy from them.

Social Value was one of the big themes discussed (somewhat passionately) at the 2015 Procurious Big Ideas Summit. Watch a video of the panel session in question here

Additionally, the social impact of that kind of sourcing may positively affect the companies’ CSR programme.

Regulations may also help to expand the sourcing from Social Enterprises and the diversity suppliers base, for instance look to the “Suppliers Diversity Programme” in the US.

Furthermore I was involved as moderator and interviewer at the SEWF speaker’s corner and had the chance to meet several international charismatic Social Entrepreneurs who shared their experience. Out of this came an extraordinary selection of ideas to supply profit companies.

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Why Supply Chain Risk Should Be On Your Corporate Agenda

Contribute to a wider understanding of organisational barriers to supply chain risk management.

The effect of natural disasters on your supply chain

Over the past decades the world has experienced several major natural and manmade disasters. Events such as the 2010 Eyjafjallajökull eruptions in Iceland and the 2011 Tōhoku earthquake and resulting tsunami in Japan have a profound impact on companies operating in the same country or even on the other side of the world.

The increased complexity and global nature of modern supply chains has the direct effect of reducing visibility of suppliers across the supply chain. Few organisations are aware of the full risks that second and third tier suppliers pose (Jüttner, 2005; Manuj and Mentzer, 2008), whilst a survey by the Business Continuity Institute found that more than 40 per cent of reported supply chain disruptions originate with second- and third-tier suppliers (Business Continuity Institute, 2013).

Supply chains are subject to a wide range of risks on both domestic and international level. Increased complexity of supply chains makes it more difficult to assess the likelihood and impact of disruptions, thereby potentially increasing the risk exposure. In addition to risks resulting from increased supply chain complexity, firms are exposed to operational disruptions due to quality problems, supply variability and capacity constraints. The past decade has also shown an increase in disruptions following natural disasters and terrorist attacks (Sheffi and Rice, 2005).

The direct effect of supply chain risks

Operating in such a connected world with high volatility hampers organisations in fulfilling their primary goal: shareholder value creation. In carrying out its business operations to maximise shareholder wealth a firm is exposed to risks that, once materialised, can have negative operational consequences and cause disruptions. Kleindorfer et al. (2003) exhibited how supply chain disruptions have a significant detrimental impact on both short and long-term operations and

financial performance. Shareholder value decreases by almost 11 per cent by these disruptions (Hendricks and Singhal, 2003) and organisations that experience disruptions, on average, experience a 40 per cent stock price decline (Hendricks and Singhal, 2005).

The effect of natural disasters on your supply chain

Implementing the right strategies

Implementation of a business continuity plan, dual sourcing strategy, and close cooperation between supply chain partners are mentioned as the most used actions in order to reduce exposure of the supply chain to potential disruptions or to mitigate the impact (MIT Forum for Supply Chain Innovation, 2013). There is however an inherent struggle with mitigating supply chain risks in today’s globally linked organisational models. The networks of interrelationships that build up a typical supply chain in its entirety hold exposure to risk. Whilst one link in the chain may bear the direct impact of a disruption, the actions of other members in the chain will have consequences for the entire network.

Research suggests that companies with mature and flexible supply chain and risk management capabilities are more resilient (lower impact and faster recovery) to supply chain disruptions. These companies have a clear focus on proactive (ex-ante) SCRM as opposed to only taking a reactive (ex-post) approach. This in turn leads to better operational and financial performance compared to firms with immature SCRM capabilities (MIT Forum for Supply Chain Innovation, 2013).

Overcoming organisational barriers by strengthening the business case

Even though advances are made, supply chain risk management activities still take up organisational resources in terms of managerial time, increased buffer inventory, etc. The major losses incurred by organisations in the aftermaths of events such as the Iceland volcano eruption and the tsunami that hit Japan, have shown that proactive SCRM is still in its infancy with most organisations. Several leaders have however emerged and shown the distinct value of proactive SCRM, thereby increasing the business case for organisations.

Saenz and Revilla (2013) demonstrate the importance of proactive and reactive strategies in dealing with unexpected disruptions through the example of how Cisco Systems, a communication

technology firm, successfully mitigated the impacts of the 2011 tsunami in Japan almost without a loss in profits, whilst the total economic losses are estimated on at least $217 billion. Having developed their risk mitigation strategies after the difficulty in dealing with the Hurricane Katrina’s aftermath, Cisco was able to evaluate the disruption impact for more than 300 suppliers – from tier 1 to raw material providers, listed more than 7,000 affected parts by number, assigned a risk rating to each part and charted a mitigation response within 12 hours.

Case studies like this help strengthen the business case for implementing (proactive) SCRM strategies. The apparent lack of proactive SCRM strategies adopted by organisations is an area that requires further research in order to convince business leaders of the importance of SCRM (Simangunsong et al., 2012).

Have your say

To assist practitioners in this analysis, the below survey has been created. Based on the findings of the survey responses and follow up interviews we will be able to identify what kind of risk mitigation strategies are used in specific industries and gain deeper insights into strategy selection antecedents and organisational barriers. By completing the survey below you will directly contribute to this valuable analysis and as a thank you, you will receive a free copy of the academic research once it is completed. Completing the survey will take approximately 10 minutes and it will be open until the 26th of July.

Contribute to a wider understanding of organisational barriers to supply chain risk management.

For any questions or further information, don’t hesitate to contact me directly.

How to Achieve Award Winning Procurement – Learn from the Experts at Lloyds Bank

In the latest in the series of articles on the CIPS Supply Chain Management Awards winners from 2014, we look at Lloyds Bank.

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Lloyds Banking Group is a financial services group with millions of UK customers and with a presence in nearly every community. A household name on the high street, the Group thrives based on how well it serves customers, on relationships within the communities that it serves and on helping Britain prosper.

Whether through retail banking, financial services or investments, there are probably few people in the UK who haven’t interacted with a part of the Lloyds Banking Group during their lives. What many people may not immediately associate with the Group is a very successful procurement function.

However, over the past three years, and against a backdrop of great public scrutiny and a recovering economy, the function has played a key role in the successful achievement of Lloyds’ overall business goals. Under the banner of ‘Simplification Sourcing’, a procurement programme was developed with the aims of reducing cost to the bank and improving the overall capability of the procurement function.

The function achieved their goals, but also put measures in place to ensure that the changes and processes would be sustainable in the future. Last year, the team was recognised with the CIPS Award for the ‘Most Improved Procurement Function’.

Andy Collopy, Operations and Property Sourcing Director, talks to Procurious about what the award means for The Group Sourcing team within Lloyds and what’s next for the function.

How did you get started in procurement?

It’s the old cliché but I kind of fell into Procurement back in 1996 as part of an organisational change. I moved from a Logistics role into Procurement and have never looked back. I remember the conversation as if it were yesterday – “We are removing a layer of management in Logistics, Andy, so your job has gone. We think you would be good at Procurement. Do you want to give it a go?” The rest, as they say, is history.

Procurement hooked me in from day 1 when I completed my first deal, negotiating the new pallet contract. I soon realised the power of Procurement when I saved the company more money in an afternoon’s intensive negotiation than I had in 2 years in Logistics through incremental efficiency.

What prompted you to submit a nomination for the award?

The main reason was that the timing was right.

Lloyds embarked upon a Simplification journey in 2011, which ran until the end of 2014 (we are now in Simplification 2 – the sequel!). We felt as though we had achieved a great deal in the 3-year programme, and getting recognition for this from external sources, as well as from our internal stakeholders, was an important part of recognising our achievements.

I have always been a fan of the CIPS/Supply Management awards since I was part of the GSK team that won the Best Use of Technology award back in 2003. I also had the honour of being on the judging panel in 2009, and saw all the hard work that went into both the submissions and judging. I was keen for us to compete against the best.

The CIPS/Supply Management awards evening is always a great evening too, to recognise great work that the function does and catch up with old colleagues.

What is the ‘Simplification Sourcing’ programme?

Simplification Sourcing was the brand name for the programme. There were 9 key elements to the Transformation programme:

  • Vision & Strategy – Set out the 3yr strategy for Group Sourcing as part of the overarching bank strategy to be “Best Bank for Customers” and “Helping Britain Prosper”
  • Internal Client Management – Ensure that everything we do in Group Sourcing is closely linked with our internal clients’ goals and objectives through strong relationship management, with financial benefits interlocked into the Business Units P&L
  • Business Sourcing Process – Execute sourcing activity through an integrated process that starts with business needs, marries this with the supply market capability to deliver an optimal outcome for the bank in terms of competitive advantage, risk management and responsible business
  • Supplier Management – Apply segmentation to effectively manage all our suppliers from a basic risk and conduct assurance perspective, as well as work with our strategic suppliers to deliver value beyond the basic contractual terms
  • Contracts & Legal – Working seamlessly with Legal to deliver an end to end contracting process that ensures correct terms are used, negotiated and stored
  • Sourcing Transactions – Enabling the “Right Way to Buy” through user friendly Requisition to Pay processes and compliance management
  • Risk & Quality Assurance – In an increasingly regulatory environment, providing control on all aspects of Procurement from basic supplier assurance to checking the quality output of sourcing plans and supplier management rigour
  • People – Building human capability through tailored learning & development programmes, as well as key talent management and succession planning
  • Change Management and Communications – Embedding sustainable change through a co-ordinated change and communications programme to ensure that key messages and deliverables land with colleagues, stakeholders and suppliers

Has it lead to greater collaboration between procurement and the rest of the business?

Definitely. I do think that we had a real need in Lloyds to change the bank, both in terms of how we serve our customers, as well as fundamentally restructuring the cost profile of the bank. This sense of purpose galvanised people around a common goal, and Group Sourcing under Michael Whitby’s stewardship seized this opportunity to play a pivotal role in the future success of the Group.

The past 3 years has elevated effective third party spend management to being one of the key levers in the bank’s forward success. We find now that we have created the ‘pull’ factor with our stakeholders, as they understand what we can do for them. Our aim now is to keep this momentum and build upon it.

What was the most critical part of the plan for procurement?

Given the need to fundamentally restructure the cost profile of the bank, a key element of the plan was to deliver significant savings in the third party spend profile. Group Sourcing achieved £560m savings over the 3-year period. The key part of this was the interlock with the business’ bottom line, which saw a 16 per cent reduction in the Group’s cost base over the period, which was a key commitment given by the bank to the City back in 2011.

This achievement should not be under-estimated, given that in many organisations I have worked in; Procurement struggles to justify its savings to key stakeholders such as Finance. This is not the case at Lloyds. This credibility has created the space to allow Group Sourcing to start to influence the wider agenda of the Group.

How have you ensured that the success you have had is sustainable?

A key part of the programme delivery was to ensure that what was created was enduring. From a process perspective, we achieved this through robust change management at the time and built the key infrastructure to be able to monitor progress moving forward and address any potential deterioration. Performance Dashboards exist for all the main elements of the sourcing process e.g. contracts, supplier management.

The more challenging element has been embedding cultural change with our colleagues in Group Sourcing. Behavioural change is a key challenge in any organisation from my experience and it takes time.

In developing the capability of the team to meet the targets we set ourselves, we have focussed on the softer skills of influencing, engagement, relationship management and authentic leadership, as well as the traditional elements such as negotiation and effective project management. This work is never done however we have seen a step change in a number of our colleagues over the past 3 years, which has been great to see.

What’s next for the function?

A good rest! No, only joking. As I mentioned earlier, as we closed out our successful Simplification 1 programme at the end of 2014, we quickly ramped up for Simplification 2. Some of this involves sustaining what we achieved in Simplification 1, but we are also looking at new elements.

While Lloyds has always focussed on its customers, our intensity to get this right under our key aim, which is to become the “Best Bank for Customers”, means that we are increasingly looking at how to achieve this. Procurement is beginning to play a key role here, bringing market insight from our strategic suppliers to the Group to stay ahead of the competition.

This can be seen in a number of ways such as suppliers helping Lloyds re-design its processes from a customer perspective i.e. end to end customer journeys, to bringing new and innovative ideas to the Group to support the ever growing Digital Banking agenda.

Where do you see the future of the profession as a whole and how can social media play a role?

This is a really interesting question. I often read articles that say Procurement won’t exist in 10yrs time as a distinct function, or category management is as strong as it ever was. My sense is that being in a position to leverage the market, and blending this with stakeholder intimacy is the most effective formula.

Third party spend continues to grow as a percentage of the overall cost base of most corporations, so the need for effective Procurement will not go away. So we are in a good place in my opinion.

I sometimes have interesting conversations with senior stakeholders, where they are willing Procurement to take the lead, yet often see reticence from the function. My view is we need to be more confident in our capability as I was all those years ago in that first pallet deal!

In terms of social media, Procurement is a laggard here. I do think that we need to up our game and embrace this medium, especially with our suppliers. This area has so much potential, and we need to push our technology partners to come up with innovative ways to interface with suppliers in both an open and confidential way, given the nature of what we do.

For more on the CIPS Supply Management Awards, and the Procurious Knowledge Partnership with CIPS, visit our website

What can bitcoin do to support supply chain transparency?

Most people have heard of bitcoin as a digital currency, used by individuals and organisations to pay for goods, services and other items online. What you might not have heard of is how bitcoin technology could aid supply chain transparency.

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Ethics and sustainability in the supply chain have been talked about at length, with organisations being pushed to ensure that they are operating correctly. However, what is less clear is how organisations can do this to the end of each of their supply chains, for all their products.

And this, according to a number of thought leaders, is where bitcoin technology can play a role.

What are ‘bitcoins’ and ‘blockchains’?

For those of you who are unsure what bitcoins are, it is an online payment system supported by open source software, described as the first decentralised digital currency. For more detail, there are a number of good videos available, like this one.

Supported by open source technology, bitcoin is not owned or operated by one individual or organisation. It is free to use (apart from an optional transaction fee) and can reduce the costs of transactions for merchants compared to credit cards.

The technology behind it is referred to as ‘blockchain’. The blockchain records all the transactions in a publicly available ledger. The ledger keeps track of what users are spending, provides authentication and keeps track of where the currency is.

Applicability in Supply Chains

There are two key ways in which the blockchain technology can be applied in a supply chain. First, the same technology could be used to track products and inventory through a supply chain, confirming receipts and automatically releasing payments to suppliers. This could help to trace items across a decentralised network.

The technology could also help to reduce transaction fees for organisations in their supply chains, as well as speed up payment, with a transaction normally processed within an hour, compared to the usual two to three days.

The second aspect is to aid transparency within supply chains. Blockchains can be adapted to keep track of what is going into a product, who has handled it, ultimately revealing publicly the full supply chain.

Using an app or website, an individual could stand in a shop holding a piece of clothing and be able to trace it all the way back to the farm that supplied the cotton. The information could be used to highlight working practices on the farm, use of pesticides, Fairtrade considerations and more, leading to far greater transparency.

Tracing the supply chain through the use of a ‘product passport’, showing the change of ownership of items through the supply chain and highlighting each step in the process. This would help to facilitate an understanding of the transactions from end to end.

The Challenge

The immediate challenge for this is being able to supply the information that would support a supply chain blockchain. The highly complex nature of organisational supply chains and the large number of suppliers mean that, although this technology could be used to increase transparency, there would be considerable work required in advance of opening this up.

This is a challenge that can also be seen as a call to action for the procurement and supply chain profession. Gordon Donovan, Principle Consultant for The Faculty, talks about creating a ‘supplier wiki’ to build the knowledge of the entire supply chain.

By getting the profession involved to fill in the whole picture, a database could be created, allowing the support for the supply chain blockchain. This could be the future, but procurement needs to be involved to ensure that the right information is made available.

If you have any thoughts on the creation of the supplier wiki, or how we could kick this off, please get in touch. We’d love to hear your thoughts!

In the meantime, here are some of the key procurement and supply chain headlines this week.

Corruption in African Procurement

  • Eighty per cent of South African companies consider political interference in the public procurement process in Zimbabwe to be a regular occurrence
  • The University of Stellenbosch survey also reported that 60 per cent of respondents thought the same was true in South Africa
  • Issues highlighted included bribery of public officials and corruption in the awarding of government tenders
  • The survey said awareness campaigns and training or policy development should be encouraged to help companies overcome these issues

Read more at Supply Management

Hi-tech Firms ‘Right-Shoring’ Supply Chains

  • The fifth annual UPS ‘Change in the (Supply) Chain survey’ has highlighted an increase in ‘right-shoring’ in manufacturing supply chains
  • The survey polled 516 senior supply chain executives in the high-tech industry in North America, Europe, Asia, the Pacific and Latin America.
  • While many firms still operate a strategy of low cost labour, an increasing number of hi-tech firms are bringing supply chains closer to home
  • It is thought greater flexibility in supply chains is behind the increase in both ‘right-shoring’ and ‘near-shoring’

Read more at TT News

British Manufacturing Rises in May

  • After a seven-month low in April, British manufacturing experienced a slight increase during the month of May
  • The Purchasing Managers’ Index (PMI) for manufacturing rose from 51.8 to 52.0 in May due to strong domestic demand
  • However, weak exports and the effects of the weak oil and gas sector have caused the annual predictions to be revised
  • In the UK, the strongest market was consumer goods, with investment in the economy also rising slightly

Read more at Reuters

Amazon Starts Hiring Push in US

  • The online retail giant is hiring 6,000 workers to staff its distribution centres across the country
  • These new workers will join Amazon’s current 50,000 US-based workers across a number of states
  • The hiring push comes as Amazon opens new centres to speed up delivery times, particularly for its ‘Prime’ service

Read more at Supply Chain Digital

Leniency for Corrupt Petrobras Suppliers?

Petrobras, a Brazilian state owned oil company

Earlier this year Petrobras, a Brazilian state owned oil company, became involved in court action over questionable activities within its supply chain. Executives at the company were accused of accepting bribes, rigging bidding processes and facilitating overcharging in return from kickbacks from suppliers.

The resultant actions have had a marked effect on Brazil’s economic fortunes. After the scandal broke Petrobras elected to freeze all activity with the suppliers involved in the controversy. This decision has sent ripples through Petrobras’ supply chain resulting in bankruptcies and staff layoffs at a number of Brazilian firms. To put some scale to the project, it is estimated that Petrobras accounts for 10 per cent of all capital spending in Brazil. The slowing of work at Petrobras is thought to be one of the key factors contributing to Brazil’s economy shrinking by 1 per cent this year.

In response to the slowdown, the Brazilian government is considering a path of courtroom leniency for the embattled suppliers. In a bid to re-spark the country’s flailing oil and gas industry and kick-start its economy, the comptroller general is in discussions with five of the 30 suppliers caught up in the scandal. It is thought that should these firms accept responsibility for their wrongdoing, pay fines and commit to compliance measures, their exclusion from participating government contracts will be lifted.

It’s important to note that the proposed moves will not have any impact on the criminal trials faced by the executives of Petrobras and its suppliers. One of whom, Nestor Cervero, was sentenced to five years in prison yesterday for allegedly using money received from bribes to purchase an apartment. Cervero is the second Petrobras executive to receive a jail sentence for his role in scandal. Last month, Paulo Roberto Costa, former Petrobras director of refining and supply, was sentenced to seven and a half years in prison. However, after signing a plea bargain he will serve only one year under house arrest.

Why your CPO is key to the future of the profession

As Procurement continues to take steps towards showing its value to organisations, the role of the Chief Procurement Officer (CPO) is becoming more and more critical to its success…

Why your CPO is key to the future of the profession

The future of procurement was a key focus of the Big Ideas Summit on the 30th of April, and continues to be so as more of the content and Big Ideas are shared across the wider procurement community.

In the past week alone, not one but two procurement experts, Jonathan Betts from Science Warehouse, and Peter Smith of Spend Matters UK, have both hypothesised that procurement will be ‘dead’ or will have ‘disappeared’ by 2030. This doesn’t mean the function will cease to exist entirely, but more that what we currently view as procurement will change to something completely new.

The Chief Procurement Officer

It’s against this backdrop that the CPO comes to the fore. At the head of a function that is constantly reinventing itself (for good or bad, we’ll let you decide), finding the right strategy to lead effectively is a tricky prospect.

To make it trickier still, a CPO can then be faced with numerous individuals, both inside and outside their organisations, second-guessing their moves and strategies. If you’re looking for what a CPO needs, a thick skin is a good place to start!

But it’s not all about the negatives for the CPO. They stand at the head of a developing function and have the power and influence to craft something that will bring value to their organisation. Whether it is in driving down cost or supporting their teams by spending time on professional development, these are other key aspects of the CPO’s role. 

The Challenges

Plenty articles are written about CPOs and the challenges that face them. Additionally, it has become more common for CPOs to be surveyed on what they consider to be the major issues facing them and the function. Since the end of 2014, the following have been highlighted as areas of concern and consideration for CPOs:

As expectations of procurement rise and the overall procurement agenda become wider, a CPO needs to ensure that they have the correct strategies in place, but also plans on how they are going to achieve them. This includes key steps, such as training for teams, but also how they are going to communicate their plans.

Community and Awards

What has become clearer in the past year is that willing communities exist to help CPOs in driving the procurement brand on. Campaigns such as the ‘I am a Procurement Leader’ from Procurement Leaders, which aim to highlight the great work that leaders in the profession are doing also offer a level of support to the senior professionals.

And awards also help to showcase the success stories from the profession that have often gone unnoticed in the past. The CIPS Supply Management Awards highlight best practice, while recognition for individual CPOs helps to set the bar that bit higher.

Last week, Richard Allen, CPO and Executive Director of Enterprise Services at Telstra (Australia), was named CPO of the Year by The Faculty Management Consultants. The annual award helps to highlight the importance of the CPO role in organisations and recognises CPOs who, amongst other things, demonstrate leadership influence within their organisations.

Initiatives such as this one show that the role of procurement is much broader than sourcing or cost saving, but is critical to the wider success of the organisation.

What do you think – can CPOs help to secure the future of the procurement function? Does your CPO deserve some good press for their work? Get in touch with Procurious and make sure you don’t go unheard! 

Meanwhile, here are some of the stories making headlines this week in procurement and supply chain.

Gartner announces rankings of its 2015 Supply Chain Top 25

  • Gartner, Inc. has released the findings from its 11th annual Supply Chain Top 25, identifying global supply chain leaders and highlighting their best practices. Analysts announced the findings from this year’s research at the Gartner Supply Chain Executive Conference.
  • “2015 marks the 11th year of our annual Supply Chain Top 25 ranking,” said Stan Aronow, research vice president at Gartner. “In this edition of the Supply Chain Top 25, we have several longtime leaders with new lessons to share and a number of more recent entrants from the high-tech, consumer products, retail and industrial sectors.”
  • The top five include three from last year — Amazon, McDonald’s and Unilever — one returning leader, Intel, and a newcomer to this elite group, Inditex (see Table 1). Three companies rejoined the list this year after a lengthy hiatus, with L’Oréal at No. 22, Toyota at No. 24 and Home Depot at No. 25. Those familiar with Gartner’s Supply Chain Top 25 may wonder why perennial leaders Apple and P&G are not included on this year’s list.

Read more at Virtual Strategy.com

Cisco Tests ‘Internet of Things’ in its Supply Chain

  • In one of the latest initiatives to get its own supply chain fully wired, Cisco has been installing thousands of sensors in a plant in Malaysia to monitor and reduce energy consumption. Mr. Kern said in an interview with The Wall Street Journal that the team leading the project believes that implementing the system throughout Cisco’s worldwide production sites will help reduce energy consumption by 20 to 30 per cent, translating into tens of millions of dollars in cost savings. “In 60 to 90 days we’re hoping to prove it,” he said.
  • Cisco has been looking at broader supply chains as a part of its efforts to spread the idea of Internet of Things, the term for the web-enabled connections that can allow devices to transmit information about such things as energy consumption or productivity. Cisco’s Consulting Services group, for instance, is working with logistics provider DHL on a project to send real-time data on warehouse operations, for instance.
  • The Malaysia project is a pilot program that is part of a $4 million fund the company established in which employees brainstorm and test projects to make the company more productive. The projects cover a wide range of supply chain issues and are relatively small-scale for a $47 billion company—the energy management project in Malaysia cost less than $700,000—with the understanding that most will fail. But those that succeed can provide innovative solutions and major savings, Mr. Kern said.

Read more at The Wall Street Journal

Europe’s Fast Fashion King clips Carlos Slim to become world’s third-richest person

  • Amancio Ortega, Europe’s richest man, has become the third-richest person in the world, passing Mexico’s Carlos Slim for the second time this year. The founder of Inditex SA, the world’s largest fashion retailer, has increased his fortune to $68 billion. It’s up 79 per cent since March 2012, when the Bloomberg Billionaires Index debuted. Inditex operates more than 6,600 stores under brands that include Zara, Massimo Dutti and Pull&Bear.
  • Sales at the Spanish company have increased 31 per cent since 2012 to $24 billion in the year ended January 2015. Since Inditex’s 2001 initial public offering, Ortega has received more than $3 billion in dividends and has invested the proceeds in commercial properties in major cities across Europe and the U.S.
  • The billionaire’s performance has eclipsed that of the three other richest people on the planet: Slim, and U.S. billionaires Bill Gates and Warren Buffett. Slim’s fortune has declined 1 per cent, to $67.3 billion, since the index debuted while Gates has increased 38 per cent and Buffett 62 per cent. Ortega has added $7 billion to his fortune since Jan. 1, while Buffett, Gates and Slim have lost a combined $8 billion.

Read more at Bloomberg Business

L’Oreal USA tracks lofty sustainability goals in annual report

  • L’Oreal USA, the largest subsidiary of the L’Oreal Group, reduced carbon emissions by 57 per cent last year.
  • The company’s 2014 Progress report, titled Sharing Beauty With All, attributes the reduction to projects put in place last year to cut carbon impact. One of those projects is a new biomass power plant in its Burgos, Spain, factory.
  • The L’Oreal Group sets lofty 2020 targets in the report that work toward its main goal: ensuring 100 per cent of its products have a positive environmental or social benefit. The company is well on its way to meeting that goal, as the report reveals.
  • Here is an overview of the L’Oreal Group’s progress:
    • 67 per cent of new products that have been screened have either an improved environmental or social profile
    • 46 per cent of new or renovated products have a new formula using renewable raw materials that are sustainably sourced or raw material from green chemistry
    • 54 per cent of new or renovated products have an improved environmental profile
    • 17 per cent of new or renovated products have an improved social profile

Read more at Triple Pundit

SMEs plan to spend average of $30,000 on supply chain software in 2015

  • Software Advice, an advisory that matches SCM software buyers and vendors, found small businesses – with revenues of less than $50 million (£31 million) – are preparing to invest an average of $30,000 (£19,000) on commercial supply chain management software this year. Medium size and large firms will spend an average of $171,000 (£109,000) for new software.
  • The research found that 21 per cent of large firms use supply chain management software, 6 per cent of SMEs do so but this is up from 2 per cent in 2013. Software Advice said software manufacturers were increasingly providing smaller businesses with lower cost solutions and subscription-based services.
  • Software Advice said the software was being used to strengthen supply chains, increase transparency and visibility, harmonise data flowing in and out through multiple channels and eliminate manual tasks, data entry or more complex warehousing operations.
  • The report said supply chain management software could streamline the purchasing workflow. “Procurement systems generally offer multi-currency support as well as tools that can automate purchases and purchasing approvals. These systems can also connect users with vast networks of qualified suppliers – a critical capability for supply chain professionals who are trying to identify the most reliable raw materials suppliers at the best price, wherever they might be sourced from.”

Read more at Supply Management

An action-packed week ahead at The Faculty

It’s grand-final week at The Faculty. The team has been working towards this week for months – there are whiteboards all over the office covered in scribbled plans and brainstorming, the printer has been running almost continuously and the atmosphere here is at fever-pitch. It’s the week of the 8th Annual Asia-Pacific CPO Forum, a 2-day event where we’ll be hosting no fewer than 56 of the region’s top CPOs, with a collective influence over $180 billion spend.

How to be a great boss

But that’s not all. This week will see no fewer than six major events, namely the Future Leaders in Procurement Forum (FLiP) followed by the Future Leaders’ Dinner, the National CPO Roundtable Meeting, the CPO Forum itself, an executive breakfast with The Hon. Jeff Kennett, and the CPO Forum Gala Dinner – the networking event of the year if you want to mix with the who’s who of procurement in the Asia Pacific.

The events run over the next three days, and attendees have been arriving at Melbourne Airport to be greeted by typical May gloom – overcast with a threat of rain, and temperatures dropping as low as six degrees tonight. No matter, though – we’re prepared for the usual witty comments about our weather from Sydneysiders and other delegates from the sunny north, and we have such an action-packed program lined up that there’ll be no thought of stepping outside the event venues until the end of each day.

I’m going to cover the events through a series of blogs, bringing you the big ideas, themes, news and surprises from the next three days. There’s so much happening that it’ll be impossible to cover it all, so I’ll be sending you the highlights, along with the key take-outs from my colleagues and the attendees. Lisa Malone is here representing the team at Procurious, and she tells me to keep an eye on the hashtags #CPOforum15 and #FLiP15 @TheFacultyHQ.

So, what’s happening today?

There are two major events happening concurrently today, catering to two sets of attendees in very different stages of their careers. At Melbourne’s Park Hyatt Hotel, 32 delegates are gathering for the Future Leaders in Procurement (FLiP) forum. Who are they? They’re category managers, procurement analysts, sourcing specialists and other role-holders from organisations all over the region, and as the name of the event suggests, they’re the region’s future leaders of the procurement profession. Nurturing these top-performers and giving them every opportunity to develop their leadership capabilities, define their career paths and expand their professional networks is an absolutely key part of the much-discussed “war for talent”. The very fact that these 32 rising stars are in attendance today is a fantastic reflection on the organisations they represent – these companies have recognised and rewarded their most talented individuals by making the time and resources available for them to attend. That’s a big deal, when you consider the frenetic pace of modern procurement careers and the rare chances we get to come up for air, focus on ourselves and consider what’s ahead.

The FLiP delegates have a huge day ahead. They’ll be learning from some of the nation’s leading CPOs including Keith Bird (QLD Rail), Andrew Ordish (AMP) and Cindy Dunham (Fortescue), along with experts on the human side of being a leader (team-building, trust-building and understanding customer mindsets) – Dave Lourdes (Evolving Human Potential) and Dan Gregory (CEO of The Impossible Institute and a regular on ABC’s Gruen Transfer). Other big names include Holly Ransom (Chief of Staff to the NAB Wealth Chief Executive and one of Financial Review’s 100 Most Influential Women), who will challenge delegates to smash through their comfort zones and practice big-picture thinking. Laurel Papworth (Forbes Top 50 Social Media Influencers and Educator, UNSW) will guide the attendees through the critical role of social media and its power to drive deeper market insights and foster supplier innovation.

Meanwhile, here at The Faculty headquarters, the biggest players in the business are arriving for the National CPO Roundtable Meeting. The Roundtables for Melbourne, Sydney, Brisbane and Perth meet on a quarterly basis, but this gathering is the only opportunity in the year for all 26 attendees to meet as a group. They’re here today because they recognise the immense opportunities offered by networking with their cross-sector peers, the benefits gained from procurement market intelligence and the unparalleled power of collaborative learning. I’m privileged to be sitting in on their meeting today and I’m aware that up-and-coming procurement professionals such as those gathering at the FLiP forum would give anything to be a fly on the wall in this room. In fact, we’re confident that when the time comes, a number of the FLiP attendees will one day take their own places at this meeting, and that’s very exciting.

The CPOs will be sharing their challenges for the financial year ahead and exploring the critical issues facing them individually and collectively. They’ll be hearing from The Faculty’s Founding Chairman Tania Seary on The Big Ideas Summit that was recently such a success in London, and from Braam Uys (Rio Tinto) on his “Iron Fist in a Velvet Glove” approach to supplier relationship management. We’re expecting some provocative ideas to come out of the group discussions, and looking forward to those “a-ha!” moments where one CPO is able to provide a solution to another’s challenge.

Coming together

So, the two meetings today have different agendas but there are certainly some common themes that will be tackled by the two groups – leadership, embedding change, raising the profile of procurement and, most of all, networking. The most exciting part of the day, for me, will come at 4.00pm when the CPOs wrap up their meeting and walk the two blocks to the Park Hyatt to offer the FLiP delegates a CPO Mentoring Masterclass. By this point of the day, the “FLiPpers” will be bursting with new ideas, inspiration and excitement about taking their learnings back to their organisations. They’ll get the opportunity to bounce these ideas off the CPOs, or perhaps seek advice on their greatest challenges, or simply discuss their vision for a stellar career path in procurement.

As exciting as the day ahead will be, I have to keep reminding myself that it’s only a preliminary to the main event ahead – the CPO Forum. But I’ll save that for another blog. The CPOs are coming through the door, so I’m going to get a coffee and settle in to find out what the future holds in store for procurement in the Asia-Pacific.

 

 

 

 

Amazon’s Big Idea: drone deliveries direct to you. What next?!

Delivery to your door? That’s all a bit old-fashioned for Amazon it seems, as their plans for delivering customer orders using drones takes shape.

Amazon plans on sending drones directly to you

The common thought was that Amazon had intended to use their drones to deliver packages straight to the customer’s door, but details of a patent lodged in the USA has opened up a whole new range of possibilities.

From warehouse to hand

The patent, lodged in September 2014 and recently accepted, allowing details to be published, proposes to deliver packages straight to the customer, tracking their location using data from their smartphones.

The delivery option falls under the previously announced ‘Prime Air’, something that Amazon has been developing for a while now. However, it goes much further than most people expected. Using the Amazon app, the customer would select the ‘Bring it to me’ option, and then wait for their package to arrive from the closest dispatch location.

The patent also reveals plans for the drones to be able to communicate with each other, exchanging information on the weather and traffic conditions in the area. The drones will be designed in a variety of shapes and sizes in order to manage packages of different weights and shapes.

And if you’re worried about the drones crash-landing in your cappuccino while waiting outside your favourite café for that must-read book, fear not. The drones will be outfitted flight sensors, radar, sonar, cameras and infrared sensors to ensure safe landing zones are found and to constantly monitor the drone’s path to ensure it avoided collisions with human or animals.

Regulatory Disputes

However, the patent’s acceptance does not mean that US authorities will approve the plans. For a while now, Amazon has been trying to convince the Federal Aviation Authority (FAA) to approve widespread use of drones, as well as allowing them to do further testing and development in the field.

Drones are currently limited to a height of 122m (400ft) and must stay in the pilot’s line of sight. Such have been Amazon’s issues with FAA regulations, that it has conducted much of its testing in Canada. The FAA has also been blamed for the US losing out in drone development, most notably to the UK, where a research centre is being built.

It’s not only the FAA that Amazon needs to convince either. A British Airline Pilots Association survey highlighted that just over half of adults think that drones pilots should have formal training, and that prison sentences should be imposed for endangering aircraft.

New Technology

While Amazon’s patent raises a number of questions about safety and privacy, it’s clearly a major development opportunity for the supply chain and logistics industries. Direct deliveries to an exact location could prove to be a considerable time and money saver, particularly for people in remote locations.

We’d be interested to hear your thoughts on this development. Is it going a step too far? Do you really want to have drones delivering packages to people wherever they are? Is the convenience worth the potential disruption?

Technological advancements were a hot topic at the Big Ideas Summit, powered by Procurious, a couple of weeks ago. From driverless trucks on mine sites, to technological disruptors in the supply chain, we’ve heard some great ideas. But we want to hear your Big Ideas too – find out how to share them here.

To access all the great content and discussions from the event, join Procurious for free today and join the Big Ideas Summit Group.

Meanwhile, here are some of the big headlines making the news in the procurement and supply chain space this week.

Apple wants to be entirely carbon neutral… one day

  • Apple wants to create enough renewable energy to power its entire global business, including its supply chain. Chief executive Tim Cook claimed it would take Apple “years” to realise the goal but said it had to happen.

  • “Apple’s goal is to achieve a net-zero impact on the world’s supply of sustainable virgin fibre and power all its operations worldwide on 100 percent renewable energy,” it said in a statement.

  • The firm already generates enough renewable energy to power 87 percent of energy use in its stores, offices and data centres, but that figure doesn’t include the supply chain. Apple said its supply chain uses 60 times as much power as its own operations.

  • Apple has previously been criticised for the environmental impact of its supply chain, most of which is based in China; regulators in China were said to be investigating two Apple suppliers for toxic dumping in 2013, amid other accusations of dumping by industrial partners.

Read more at Wired UK

Wal-Mart builds Supply Chain to meet e-commerce demands

  • Wal-Mart Stores Inc. is one of a growing number of big-box retailers building out their supply chains with distribution centers designed to meet the demands of online shopping. The company expects to open four such giant facilities this quarter, as it aims to triple online sales by 2018, to $35 billion from $12 billion last year.
  • Building fulfillment centers designed to cater to e-commerce, which demands the ability to handle a large number of small orders, can help retailers conduct more profitable online sales, said Brian Kilcourse, managing partner at RSR Research LLC, a retail technology consulting firm.
  • Each of Wal-Mart’s new facilities will be more than 1 million square feet and hold at least 500,000 items—much larger than its traditional distribution centers for stores, which hold 30,000 to 50,000 items. Wal-Mart opened an e-commerce center in Texas last year, and like that one, the new buildings will use both human labor and automation, such as computer-controlled chutes, to move items.
  • The goal of Wal-Mart’s new centers is to provide a single place stocked with a wide variety of products to get shipments collected and sent faster, a Wal-Mart spokesman said. Ultimately, analytics behind the shopping software will determine, on the fly, the most efficient way to fulfill the order, the spokesman said.

Read more at The Wall Street Journal

Jaguar Land Rover honours supply chain firms

  • Vehicle manufacturer Jaguar Land Rover has recognised its top ten direct suppliers at its inaugural Supplier Excellence Awards.
  • Companies from Corby to Cairo were presented with trophies by actress Joanna Lumley, at a ceremony held in the West Midlands, close to the heart of the company’s UK operations.
  • Ian Harnett, Jaguar Land Rover Director of Human Resources and Purchasing, said the awards had been instigated to recognise the role supply chain firms played in helping the company achieve its goals.
  • A total of 10 trophies were presented for performance in 2014:  two gold, four silver and four bronze.  The awards went to individual plants or facilities, rewarding on-time delivery, continuous quality, accreditation to international and Jaguar Land Rover standards and flexibility to meet the company’s developing needs.

Read more at TheBusinessDesk

New partnership to transform healthcare procurement in Asia-Pacific

  • UK and Australia-based company Healthcare Procurement Partners (HPP) has expanded its Asia-Pacific operations with a contract to deliver cost-savings and process improvements for the largest corporate healthcare provider in Asia-Pacific, Fullerton Healthcare Group.
  • Following an initial program of reducing non-payroll spend for Fullerton Healthcare’s Australian subsidiaries, Brisbane-based HPP will now pursue similar procurement projects in Singapore and Indonesia.
  • While the terms of the Project Fusion contract between HPP and Fullerton Healthcare Group remain commercial-in-confidence,  HPP’s local on-site presence in these key Fullerton Healthcare markets is expected to deliver significant repeatable annual savings by mid-2015.
  • HPP’s Managing Director, Daniel Williams said: “This promotes the transparent exchange of knowledge about how and where to unlock savings and improve cost-efficiencies, locally and more widely,”

Read more at NewsMaker

$349 Apple Watch components cost only $83.70

  • A “teardown” of the product by IHS Technology found the components cost $83.70, compared with the retail price of $349, giving it the lowest hardware costs relative to consumer price of any Apple phone researched by IHS.
  • IHS said estimated component cost to retail price ratios for other Apple products it had reviewed ranged from 29 per cent to 38 per cent.
  • The company said its analysis included manufacturing costs of $2.50 but did not include costs such as logistics, capital expenses, research and development, software and licensing.
  • Kevin Keller, senior principal analyst for materials and cost benchmarking services at IHS, said: “It’s fairly typical for a first-generation product rollout to have a higher retail price versus hardware cost.

Read more at Supply Management

Thinking the Unthinkable – Big Ideas on Supply Chain Risk

How does the bird flu crisis affect supply chains?

2030 may seem like a long way away right now, but if you are planning your procurement strategies, you need to be thinking that far ahead. But what are the unpredictable risks in the supply chain that represent your ‘blind spots’?

As the news broke over the weekend about another avian flu crisis in the United States, North American organisations and supply chains could be forgiven for thinking that they have already had their fill in 2015.

In what is seen as the most significant outbreak of avian flu in over 30 years in the US, 16 states have declared states of emergency and are now quarantining affected farms. At Sunrise Farm in Iowa, one of the biggest farms in America, over 4 million birds will be lost, accounting for over 1 per cent of all the egg-laying hens in America.

Poultry exports are worth over $5 billion to the US economy, but the overall cost, as well as the knock-on effect to businesses further down the supply chain, is difficult to estimate. In Iowa alone, farmers are already predicting losses of $850,000 each, assuming that the outbreak can be contained.

2015 – A Bad Year

And this is just the latest in a long line of supply chain issues that have had a major impact in North America in 2015.

  • Winter Storm Juno – hit the Eastern United States in January, causing record snow falls and transportation disruption
  • Port Strikes – West Coast ports shutdown due to strikes, costing the US economy $2 billion per day
  • Tornados – the Midwest was hit by tornados, causing widespread destruction and killing 2 people

However, it’s not just North America that is seeing supply chain disruption on a greater scale than normal. A ‘once in a decade storm’ hit New South Wales last week, closing roads, cancelling ferries and causing massive disruption.

Unpredictable Risk

While 2015 has been hard on a number of supply chains, these are by no means isolated incidents. Friday the 24th of April was the second anniversary of the disaster at Rana Plaza in Bangladesh. A building collapse killed 1,134 people, the vast majority of whom were involved with making clothing for western markets.

While conditions are improving and better measures are in place to stop something similar happening again, progress is slow, while the demands for so-called ‘fast fashion’ hampers ethical considerations and makes wholesale change difficult.

However, all of these issues, all the risks are outlined above are unpredictable, making it extremely difficult for organisations to protect themselves completely from the fall out.

Protecting the Supply Chain

One of the themes of the Big Ideas Summit will be what procurement’s ‘blind spots’ are. While risks occur in an unpredictable fashion, organisations cannot let them be ‘unthinkable’ and need to understand what could be done in order to mitigate emergent risks.

  • Map your supply chain – know where your suppliers are and where your products are coming from. Where are the potential issues of getting your product from its creation to your end customer?
  • Identify transportation weaknesses – consider the port strikes in America as an example. Where are your products routed through? Can you find good alternatives in the event of a crisis? Is it worth splitting that load now?
  • Calculate costs – if you can understand the potential cost to your business of a failure in the supply chain, then you can use these figures to build support in the business for your plans.
  • Prioritise your risks – is there a particular item that is critical in the supply chain? Know everything there is to know about these items so that you can prioritise correctly.
  • Plan and prepare – Fail to prepare, prepare to fail. This is exactly what will happen if you haven’t spent some time carrying out analysis and understanding where your risks might come from.

There is no such thing as ‘no time’ to do this. The time you spend now may save you time and money further down the line.

Have you got any other suggestions? Can you think of any other ‘blind spots’ that exist for procurement and supply chain? Visit the Procurious Group for Big Ideas and tell us what you think – we’d love to use some of these to quiz our experts later this week.

Meanwhile, here are the other stories making headlines this week.

US Defense sustainability embrace a goldmine for Aussie innovators

  • The US Department of Defense’s multi-billion-dollar Net Zero Fund offers a huge potential market for Australian energy efficiency and sustainability companies.

  • Net Zero is a significant undertaking by US Defense to, in effect, green the military and supply chains. It aims to bring civilian sustainability measures into the defence arena and as the Defense literature states this can be done “while also maximising operational capability, resource and availability and wellbeing”. The funds being made available for Net Zero are therefore to be allocated to improving not just the energy usage of the US military, but also to retrofitting a potential 200,000 installations globally in an environmentally sustainable manner. The value of the installations alone is put at a conservative US$141 billion.
  • This presents a massive potential market for Australian applied research and Australian companies to offer environmentally sustainable solutions and energy efficiency to the US defence industry and the workshops aim to facilitate such contracts…

Read more at The Fifth Estate

Apple Watch: supply chain strain is the new norm

  • This week sees the launch of the Apple Watch. However, with rumours of 1 million pre-orders in one day in the US alone and the firm now pushing estimated delivery times for its product into June, speculation is rife that its supply chain may not be able to keep up with demand.
  • This type of speculation ahead of a big launch is nothing new. Recently Samsung was forced to admit that it may be unable to fulfil the 20 million pre-orders received for the new Galaxy S6 and S6 Edge.
  • Reports indicate that shipping of the product started in the US a week ahead of the April 24 launch date. It is also likely that the company’s procurement leaders have taken the required steps to achieve supply chain agility and where possible, spread risk across multiple suppliers.
  • This ‘supply chain strain’ has become the new norm in the consumer- driven world of high-tech gadgetry, where all eyes are on the newest and most innovative devices. For some companies, the struggle to meet demand is regarded as an endorsement of a product’s popularity. In fact, from a reputational perspective, a stock surplus would probably be more damaging to the company’s brand, than a supply shortage.

Read more at The Telegraph

Could the Groceries Code Adjudicator increased powers change procurement?

  • Founded in 2013, the Groceries Code Adjudicator (GCA) is a supermarket watchdog set up to regulate the relationship between food retailers and their suppliers. Its intention is to ensure the fair treatment of suppliers to reduce their exploitation.
  • We were met with news earlier this year that Tesco is facing a formal investigation by the GCA, after suspicion arose that it breached regulations on supplier contracts. After Tesco overstated its profits, the GCA looked into the supermarket chain and found ‘reasonable suspicion’ that it had breached the code of practice for grocers. It’s not just retailers that have shown unethical treatment of suppliers: world-famous food brand Heinz has come under fire for reportedly doubling the length of time it takes to pay suppliers.
  • The GCA has been granted increased power through new legislation and now has the power to fine retailers up to 1 per cent of its annual UK turnover. That means that the GCA could sting Tesco with fines of up to £400 million. Suppliers may soon enjoy a more equal relationship with retailers and the tough terms that they have previously had to cope with could ease. Food retailers may need to modify how they operate to ensure compliance and the procurement process could well be among these changes.

Read more on Supply Chain Digital

Top-performing supply chains: Pharmaceutical companies

  • Supply Chain Insights studied balance sheet patterns for over 2,000 public companies and shared those results with over 150 executive teams.
  • Progress in driving supply chain excellence in this sector is stalled. The reason? With a growth agenda and intense investment in research and development (R&D), growing regulation, and the building of global capabilities, the last decade has been a time of change for the global pharmaceutical companies. Their progress has not been equal to that in the consumer goods or food and beverage industries. The many mergers and acquisitions among companies in this category have also slowed progress in achieving supply chain excellence.
  • With a focus on both performance and improvement, which company did best? In the pharmaceutical industry, it is tough to judge which company is the leader—that is, who has the best metrics. The company posting the best performance in the portfolio of metrics is AstraZeneca; however, the company is not improving (as measured by the Supply Chain Index for the two periods studied). The companies making the greatest improvement are Biogen Idec and Novo Nordisk. Moreover, most companies in this sector are making progress on individual metrics, but not on the entire portfolio.

Supply Chain Insights: Best pharma companies

Read more on Supply Chain Insights

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