Category Archives: Procurement News

Fighting for the animal’s right in the food chain

The Sunday roast, the Christmas turkey dinner and the summer BBQ – most of us enjoy meat as part of our diet. But do we give enough consideration to animal welfare in the supply chain?

Fighting for the animal's rights in the food chain

For many people, meat plays a part in most meals during a week. Traditionally, the Sunday roast was a time for families to sit down and enjoy a long, relaxing meal and some quality time together.

However, over the past couple of years, there has been increasing focus on the welfare of the animals, from battery and caged hens, to stall-bred pigs and cows. Despite the best efforts from some high-profile organisations, there are concerns that there is much still to be done.

Meat Sales on the Rise

In the past year, sales of all meat in the UK have increased, following falls in 2013 in relation to the horsemeat scandal. It may come as a surprise to many, but sales of horsemeat have actually increased too, with more people enjoying the meat as a leaner alternative to beef.

Sales of Scottish meat have been given a boost by a new partnership with Swedish retailer ICA, while Hybu Cig Cymru (HCC) – Meat Promotion Wales – aims to increase Welsh beef and lamb sales by more than one-third by 2020. Part of the HCC plan involves ensuring that farmers are balancing efficiency with sustainability and strong environmental credentials.

Welfare Concerns

But further afield, welfare concerns still abound. Australia has seen a boom in exports of live cattle for slaughter to Vietnam, with a 274 per cent increase in sales between 2013 and 2014. However, exports are predicted to slow dramatically in coming months due to a number of factors, one of which is the suspension of facilities due to animal welfare concerns and suspect supply chain practices.

It was also reported in the USA last week that both McDonalds and Costco are phasing out the use of human antibiotics in their chicken supply chains. The move comes after consumer pressure and concerns that the common use of these antibiotics could increase bacterial resistance to treatment, potentially creating ‘super-bugs’ in humans.

Although McDonalds has given suppliers two years to comply, many experts warn that it will take up to a decade to fully eradicate the practice.

Similar timescales can be expected on the eradication of caged-hen eggs in supermarkets. In Australia, Woolworths and Coles, both came under public scrutiny for stocking caged-hen eggs in the past year. Both have since removed own-brand caged eggs them from their shelves, but they won’t be fully removed from shelves until 2018.

Global Efforts

Full-scale, global change in animal welfare will take time. Organisations need to take responsibility for not only their own practices, but also the practices of their supply chains, down to second and third tier suppliers and beyond.

In late 2014, Nestle signed an agreement with World Animal Protection to improve the standards of animal welfare in its supply chain, while Subway, Waitrose and Marks & Spencer all have existing commitments to sustainability and animal welfare as part of long-term goals.

As consumers, we can also play our part by purchasing sustainably. If it becomes unprofitable for organisations to source in a way that is not sensitive to animal welfare, then it’s more likely that change will take place.

Find out more about UK animal welfare policy by clicking here.

Read on for the other procurement and supply chain stories making the headlines.

Fairtrade Foundation assesses female participation in international supply chains

  • As the world prepared to celebrate International Women’s Day Sunday (8 March), Equal Harvest, a new study published by the Fairtrade Foundation, states that enabling more women to join the organisations that grow produce such as bananas, cotton and tea, could benefit businesses and support global development, as well as bringing gains for women.
  • Although women make up almost half the agricultural workforce in developing countries, they account for just 22 per cent of the farmers registered as members of the 1,210 small producer organisations that are certified by Fairtrade. Legal, social and cultural norms often act as barriers to women’s participation, for example, membership of co-operatives can be dependent on owning land or crops, some agricultural work may be deemed inappropriate for women, and women may be expected to undertake most of the domestic work in the home, giving them less time to participate in producer groups.
  • Fairtrade says that increasing the participation of women farmers could boost productivity, improve development outcomes for communities and provide opportunities to launch new products such as the ‘Grown By Women‘ range marketed by Equal Exchange.
  • A female banana producer in the Dominican Republic said that enabling women to become members of producer organisations is important because “it gives women the right to vote, to participate in decision making, to receive benefits and to live with dignity.” A male cotton producer in India said that women should be supported to take up leadership positions because “women are more disciplined and organised and will run these institutions better, whereas men fight amongst themselves and let egos come in the way.” 

Read more on Supply Chain Digital

Retailers told to step up

  • The retail industry is not doing enough to “clean up its act” with suppliers, the UK’s supply chain body has warned alongside a new survey highlighting the damage that bullying tactics are having on the sector’s reputation.
  • Figures from the Chartered Institute of Procurement & Supply (CIPS) out today revealed that 88 per cent of supply chain managers think supplier bullying is giving procurement a bad name. Nearly half (49 per cent) of respondents cited“pay to stay” charges as the worst bullying tactic being used to squeeze suppliers, while 35 per cent gave late payments or long payment terms as the worst example of malpractice.
  • David Noble, CIPS group chief executive, said: “It’s time the industry sat up and took notice.”

Read more at City A.M.

Saudi Arabia world’s biggest, Turkey 9th defense importer

  • Saudi Arabia passed India to become the world’s biggest arms importer last year whileTurkey was the ninth country, as concerns about Iran’s ambitions have increased tensions in the Middle East.
  • India was the second-biggest arms importer in 2014, followed by China, the UAE, Taiwan, Australia, South Korea, Indonesia and Turkey. Saudi spending rose 54 per cent to $6.5 billion last year, while India imported $5.8 billion, according to data released Sunday by IHS, a leading analyst of the global arms trade. Imports will increase 52 per cent to $9.8 billion this year, accounting for $1 of every $7 spent globally, IHS estimated, based on planned deliveries.
  • “This is definitely unprecedented,” said Ben Moores, the report’s author. “You’re seeing political fractures across the region, and at the same time you’ve got oil, which allows countries to arm themselves, protect themselves and impose their will as to how they think the region should develop.”

Read more at Todays Zaman

Clogged transit costs billions, highlights supply chain weaknesses

  • Both government and private research agree: America’s freight system is under serious pressure, and supply chains are particularly vulnerable to the strain.
  • Over the next two decades, 45 per cent more freight will move over America’s already crowded roads, rails, seas and skies, according to the Department of Transportation, which recently released a white paper, Beyond Traffic 2045. The report highlights the need to ease congestion and warns that without a solution, companies are wasting significant funds on their procurement operations.
  • Nike, the DoT found, spends an extra $4 million every week and carries up to two extra weeks of inventory to cover anticipated shipping delays.
  • But these delays impact more than just the procurers of these goods stuck in gridlock… Research shows that technology and innovation will be paramount in smoothing out the congested supply chains across the U.S., and throughout the globe. But findings also show that players in the supply chain are using highly outdated technology, if any at all, to make the procurement process more efficient.

Read more at Pymnts.com

The next generation of location aware supply chain applications

  • It has long been possible to build a geofence and detect when an inbound carrier was 20 miles out from a warehouse.  But warehouse managers, and transportation planners are busy.  What good would those notifications do?  These managers and planners don’t have time to look at every carrier notification and examine whether that truck will hit their dock on schedule.
  • Supply chain planning applications have long been in-memory applications.  This is a fancy way of saying that these applications were based on technologies that allowed them to solve very big problems very quickly. But now there is a new generation of in-memory computing.  That means the problems we can solve quickly are getting bigger and bigger.
  • JDA is an example of one supply chain software firm looking to utilize the new generation of in-memory computing to build larger supply chain models spanning planning and execution. Today a company with advanced logistics capabilities would have a warehouse management system (WMS), a dock scheduling and yard management solution, and a transportation management system (TMS) in order to improve their logistics capabilities. Both WMS and TMS have good business cases associated with them.  But these applications are laser focused on their own domains.
  • JDA is beginning to build JDA Intelligent Fulfillment, a set of logistics planning and execution solutions that understand constraints that cross warehousing, the yard, and transportation.

Read more at Logistics Viewpoints

The UK High Street – terminal decline or natural change?

Another traditional high street store has announced store closures due to falling revenues and profits – is this the latest step in the terminal decline of the UK high street?

Is the UK high street in decline? Thorntons in the news

UK chocolate retailer Thorntons has reported a fall in revenues for the six months to January 2015 of 8 per cent to £128.2m. This comes hot on the heels of the pre-Christmas profit warning issued by the company and the closure of just under half of its stores.

Thorntons has suffered from falling sales and unprofitable stores for a couple of years and made the decision to move more of its sales to other outlets and retailers. This move has since been compounded by the announcement of the loss of shelf space at two major UK supermarkets.

High-profile casualties

Thorntons are far from alone. According to a report issued by PwC, there was an average of 16 shop closures per day in the UK in 2014. Coupled with a reduction in the number of new shops opening, this is leaving many high streets full of empty units.

In the past year alone, a large number of high-profile names have either been forced to close high street stores or have collapsed entirely. Phones4U and La Senza both collapsed last year, while 2015 has already claimed its first big victims in Bank, USC and Austin Reed (all fashion retailers) and Radio Shack in the US.

Why is this happening?

For many, the main cause is seen as the out of town retail parks, complete with free parking and everything in one place. However, even these shops aren’t immune to the changing environment.

The Office of National Statistics retail statistics have shown an average 12 per cent increase on online sales to the same period the previous year throughout 2014.

Many organisations have failed to keep up with the pace of the digital economy. Poorly designed shops with unclear offerings, poor customer service and unsuccessful marketing just don’t cut it against the convenience of shopping online and having everything delivered to your door.

Organisational Benefits

It’s not just the consumers who are benefiting either. There are major positives for organisations and supply chains for having an online operation. Not having to run a high street store means reduced overhead costs and monthly outgoings and the ability to be located in low-rent areas.

With fewer staff required, the goods or services can be offered at a lower cost, as companies require less mark-up to make a profit. Stock can also be ordered in bulk, further reducing costs, while at the same time ensuring that there is sufficient stock to cover customer orders.

Hope for the Future?

All is not lost though. Many consumers still want shops that they can visit and often, the convenience of online shopping is outweighed by the risk of not getting what they want first time, or not being able to see what it is they are buying.

It is widely felt that organisations that successfully merge the two worlds of digital and physical shopping can help to save the high street. For example, the John Lewis Group now offers ‘click-and-collect’ to any of their department stores or Waitrose supermarkets for online orders.

Special offers can be sent to a smart phone when customers are in store, while augmented reality (think Google Glass) can be used to show you what a sofa would look like in your house. The companies who can tailor their offering best will be the ones who populate the high streets of the future.

So, terminal decline? Probably not. Natural state of change? Arguably yes. And it looks as though it will be for the better.

Read on for the other procurement and supply chain stories making the headlines.

MoD spent £33 million on ‘botched’ defence procurement outsourcing

  • The Ministry of Defence (MoD) must “sharpen up” its reform of procurement, after “throwing away” £33m on botched changes.
  • This follows a report from the National Audit Office (NAO), Reforming Defence Acquisition, which examined the MoD’s plans to improve the skills of Defence Equipment & Support (DE&S) staff, its systems and the way it interacts with the armed forces.
  • The NAO concluded that improving the performance of DE&S remained the most challenging part of the department’s strategy, although progress has been made. “There is now a clearer separation of responsibilities between the commands, which request equipment, and DE&S as the organisation responsible for delivering the equipment,” the report said.
  • It also outlined how the department had spent two-and-a-half years and £33 million trying to implement its preferred option of a government-owned, contractor-operated (GoCo) model to reform DE&S, before it was deemed undeliverable and halted in 2013.

Read more at Supply Management 

Will a new UK law eradicate supply chain slavery?

  • Whether it is high street fashion, bedding from a department store or eggs from a supermarket, few British shoppers would stop to ask whether slave labour was involved in making their goods.
  • Yet forced labour often lurks along the supply chain as a product and its individual parts are manufactured, packaged and distributed in a process linking multiple suppliers in many different countries, business ethics experts say.
  • Globally, the International Labour Organisation estimates that 21 million people are victims of forced labour. In Britain alone, the Home Office (interior ministry) says up to 13,000 people are forced into manual labour, sold for sex in brothels, or kept in domestic servitude, among other forms of slavery.
  • A government-backed draft law aims to tackle exploitation by requiring businesses in Britain to disclose what action they have taken to ensure their supply chains are slavery free.
  • The clause will provide guidance to companies about the kind of information they could disclose. However, the Home Office said firms will not be told what must be included, and that it expects disclosures to differ from company to company.

Read more at Reuters

SLG’s SCOR expert recognized for supply chain leadership

  • Satellite Logistics Group (SLG), a leading supply-chain solution provider for the beverage industry, announced today that Dan Swartwood, the company’s vice president of process and technology, has been named one ofSupply & Demand Chain Executive magazine’s 2015 Pros to Know.
  • The annual Pros to Know Awards recognize select supply chain executives who have helped their clients, companies, or the supply chain community at large to prepare for the significant challenges in the year ahead.
  • “This honor highlights the many thought-leaders who are helping to shape the Supply Chain industry and advance Supply Chain as a respected discipline in the enterprise,” said Barry Hochfelder, editor of Supply & Demand Chain Executive. “Their efforts in developing the tools, processes and knowledge base necessary for Supply Chain transformation, and in promoting new approaches to supply chain enablement, have earned them a place on this year’s Pros listing.”
  • Swartwood has guided a number of U.S. and international companies in various industries through the methodologies and has seen the results firsthand. On average, opportunities for improvement equate to two to six per cent of revenue.

Read more at PR Newswire

Apple under scrutiny in Labor’s tax loophole crackdown proposal

  • Large international tech companies operating in Australia such as Apple and Google could come under increased fire over their local tax treatment under a new proposal by the federal Labor Party to clamp down on loopholes.
  • In what Shadow Treasurer Chris Bowen described as an “opening salvo in the battle of ideas”, Labor’s first major policy announcement in opposition is to introduce a range of measures to stop billions of dollars of tax from bleeding offshore.
  • “This announcement today sets a blueprint for Labor’s approach in office,” Bowen told reporters in Canberra on Monday. The federal opposition’s tax package, which has been costed by the independent Parliamentary Budget Office, is worth AU$1.9 billion over four years in additional revenue.
  • It includes tightening of the so-called “thin capitalisation” rules, which allow companies to offset profits against debt servicing costs in high-tax jurisdictions such as Australia to reduce their taxable income.

Read more at ZDNet

Drones still useful in supply chains despite FAA regulations

  • Last week the Federal Aviation Administration published its rules and regulations for the oversight of drone usage within the United States. Many will and have argued that these rules are too restrictive for companies such as Amazon or Google to truly take advantage of the technology. The basic parameters of the guidelines set by the FAA:
    • Drones must be less than 55 lbs in weight
    • Can only fly during the day in good weather
    • Must not fly close to airports
    • Cannot fly faster than 100mph
    • And must be within visible site of the operatorLast week the Federal Aviation Administration published its rules and regulations for the oversight of drone usage within the United States. Many will and have argued that these rules are too restrictive for companies such as Amazon or Google to truly take advantage of the technology. The basic parameters of the guidelines set by the FAA:
    • On the surface these restrictions severely limit the dreams of the likes of Jeff Bezos. One of the great opportunities for drones within the supply chain and particularly with the delivery side is the ability to enhance the last mile portion. The last mile is always a challenge since you have to break down the orders to the individual level. Drones seem to offer an affordable and flexible solution – but not if the FAA rules are in place. This does not mean there are not some use cases that supply chains can take advantage of immediately:
    • These include: Asset monitoring and remote delivery… read more over at ZDnet

The iCar cometh: Is Apple about to diversify its supply chain further?

First the iMac, then the iPod, iPhone, iPad and the smartwatch – is the iCar next?

Will we see driverless cars on the roads of our future?

It might seem a bit far-fetched to think that the company that has revolutionised the way we communicate would expand into the electric car market, but reports in the past week suggest that we might see an Apple car as early as 2020.

Although much of this remains speculation (Apple are refusing to comment on any of the reports), there seems to be strong evidence that the tech giant may be getting ready to enter a completely new field.

Head-hunting

Apple has reportedly brought on board senior executives from both Ford and Mercedes-Benz to head up a new team at its HQ. Moves have also been made to hire employees from Ford and Tesla in the fields of car safety, renewable energy, battery and hybrid technology and car software systems.

As ever, none of this has come without issues. Elon Musk, the owner of Tesla, has been quoted as saying that Apple has been tempting Tesla employees with huge signing bonuses and salary increases, while A123 Systems, a battery technology company, is reportedly suing Apple for ‘aggressively poaching’ its senior engineers.

Busy Market

So, will Apple diversify its supply chain further? With the organisation rumoured to be spending $1.7 billion building a plant with Japan Display to allow it to produce its own OLED displays, is there funding available to bring a car to market inside 5 years?

There are a few big players in the electric car market to contend with. Alongside Musk’s Tesla, arguably the innovation leader, automotive giant Toyota is currently top of the tree with its Prius and Lexus brands. Other notable competitors include Nissan, Porsche and Daimler, with either fully electric or hybrid vehicles.

With traditional manufacturers taking more notice of new entrants, the electric car market is wide open for innovation. Even if it took Elon Musk sharing all his designs to try to prod competitors into action.

User Experience

However, entering into this market with a vehicle is very risky. Sales of electric cars are low and margins are tight, leading people to question why anyone would want to get into the market right now. Instead, Apple may choose to focus on the user experience, something that it already has a strong reputation for.

Procurious has reported on recent developments in driverless, autonomous or technologically enhanced vehicles. As there have been for Google, there would be opportunities for Apple to develop user systems that could be fully integrated into cars. This would mean Apple was using its existing expertise, and therefore lowering its exposure and risk.

This would also open up the possibility of a partnership with one of the established players in the market, sharing innovation and development costs, plus opening up a new market for Apple. Just think how marketable a car would be with a fully integrated Apple operating system.

Even without the ‘iCar’, Apple can certainly play the role of disruptor that it does so well, and maybe bring the rest of the industry along too, to the benefit of the consumers. These are exciting times in the car industry and we wait with interest to see the next move.

Japan Display – http://finance.yahoo.com/news/apple-spend-1-7-billion-163417908.html

Innovation – https://hbr.org/2015/02/what-happens-if-apple-starts-making-cars

Meanwhile in related news:

Qatar inks deal for Doha Metro driverless trains

  • A consortium of five companies has signed an agreement to build and deliver a full-automated driverless metro system in Doha. The group consisting of Mitsubishi Heavy Industries, Mitsubishi Corporation, Hitachi, The Kinki Sharyo Co and Thales said it has received a letter of conditional acceptance from the Qatar Railways Company for the systems package for the metro project which is slated for completion in October 2019.
  • The package calls for turnkey construction of a fully automated driverless metro system. Included are 75 sets of three-car trains, platform screen doors, tracks, a railway yard, and systems for signaling, power distribution, telecommunications and tunnel ventilation.
  • The package is also expected to include maximum 20-year maintenance services for the metro system after its completion.

Read more at Arabian Supply Chain.com

West Coast port nightmare may start to end

  • More than seven months after the previous contract expired June 20, and after more than three months of alleged work slowdowns by West Coast longshoremen that contributed huge delays in moving containers, a tentative deal between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMI), which represents West Coast ports and terminal, was at last reached over the weekend. “Normal” port operations were said to have started back up Saturday night.

  • The tentative agreement came just three days after US Labor Secretary Thomas Perez arrived in San Francisco to broker a deal with the help of a federal mediator who had joined the talks six weeks earlier. An agreement on the last remaining issue – a rather obscure one relating to use of arbitrators to settle disputes – was successfully resolved, leading to the agreement.
  • The contract, however, will still need to be ratified by rank and file union workers and all the companies and entities represented at the ports and terminals by the PMI. Reports are the union vote may not be held until sometime in April.

Read more at Supply Chain Digest

Companies wasting billions every year by not sharing supplier information

  • Global companies are wasting more than $30 billion (£20 billion) a year because they do not share information about suppliers, according to business information provider Achilles.
  • It says only a third of global firms across the UK, USA, Spain, Brazil and Nordic countries work collaboratively with other similar businesses to manage information about suppliers. This is despite 88 per cent of them saying domestic and international ‘arms’ of their company require the same details from suppliers in terms of health and safety, environment, quality, sustainability and ethics, according to a survey of supply chain professionals from 300 large businesses across the oil and gas, manufacturing, construction and utilities sectors.
  • Achilles chief executive Adrian Chamberlain said: “It is much more efficient when whole industries agree common standards required of all suppliers in terms of health and safety, ethics and compliance, then share the administrative burden of collecting, checking and auditing information,”
  • He added there was no need for firms to be nervous about sharing supplier information, as it was not commercially sensitive.

Read more at Supply Management

Citi and Etihad Airways sign supply chain finance partnership

  • Citi, the leading provider of cash management and trade services in the MENA region and Etihad Airways, the national airline of the United Arab Emirates, today announced the signing of an agreement to provide a Supply Chain Finance (SCF) solution to pay select suppliers.
  • The innovative financing program will enable Etihad Airways to unlock liquidity and pay its suppliers almost immediately through funding provided by Citi. It also offers a highly customised structure that will cater to the airline’s supplier segment across the globe, and will facilitate access to liquidity across businesses of all sizes.
  • James Rigney, Etihad Airways’ Chief Financial Officer, said: “Our suppliers are an essential part of the success of our business and we are happy to provide the tools that offer new credit and liquidity sources and accelerate their access to cash flow.

Read more at eTurboNews

In surprise move, Honda Chief to step down

  • Honda Motor’s chief executive, Takanobu Ito, will step down in late June after six years in the top post and be succeeded by Takahiro Hachigo, a low-profile engineer with global experience, the company said in a surprise announcement on Monday.

  • Honda, Japan’s No. 3 automaker, behind Toyota and Nissan, has hit a rough patch during the past year with quality problems that have led to multiple recalls of its popular Fit hybrid subcompact, which Mr. Ito said this month could have been caused at least in part by an aggressive sales target. Such self-inflicted setbacks were compounded by multimillion-vehicle recalls to replace airbag inflators made by a top supplier, Takata, that have so far been linked to six deaths, all in Hondas.

  • For the past three years, Mr. Ito, 61, a feisty former supercar engineer, has shaken up Honda’s tightly knit supply chain as the automaker has sought to trim costs and find more cutting-edge technology. “I think this move is an attempt by Honda to tread a different course, with someone who upholds harmony,” said Takaki Nakanishi, an auto analyst and chief executive of Nakanishi Research Institute.

Read more at The New York Times

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State of Flux Technologies introduces SRM technology brand

Reinforcing their focus on supplier management software, State of Flux Technologies launches a new name and brand – Statess.

State of Flux Technologies launches its new name and brand – Statess!

Following a year of increased growth and investment on their supplier management platform, State of Flux Technologies celebrated the launch of its new name and brand Statess (pronounced State-ess) with clients, procurement leaders and industry experts last week.

Preserving the strong relationship and heritage, Statess will continue to work closely with the State of Flux team to deliver market leading supplier relationship management (SRM) solutions.

“Our global SRM research has shown that companies who invest in SRM technology deliver incremental post-contract benefits. Now is the perfect time for Statess to help companies deliver these benefits.” Alan Day, State of Flux Chairman and Founder

Led by CEO Lance Younger, Statess has seen an increase in the number of clients over the past year, including Centrica, IAG, Friends Life and Ladbrokes. They’ve grown the team and continued to innovate, adding great new functionality in supplier innovation management, performance management, risk management and sustainability/corporate social responsibility (CSR). Statess also has an expanded partner ecosystem, including 15 best-in-class providers, from spend analysis to sourcing, P2P, and sustainability/CSR.

“Being presented the Gartner Cool Vendor 2012 award recognised our pioneering supplier management platform, and since then with our clients and team we have continued to move forward solving supplier management challenges and empowering teams across the enterprise. We created the first supplier innovation module in 2013, and 2014 was another fantastic year with more product innovation and great customer experiences. Our new brand and strong partner ecosystem reinforce our passion and focus on supplier management software.” Lance Younger, Statess CEO

In 2014, supplier management continued to surge as a critical approach for companies to deliver differentiation and for procurement to co-create the agenda with the business. In 2015, ambition remains key, and leaders will be defined by execution – intelligently simple execution. Statess is on a mission to make SRM easy for all and they believe they can continue to do this for all their clients.

Check out the Statess website and social media channels to learn more.

Closed for business: US West Coast ports shutdown amid dispute

Supply chains across America are facing up to six months’ disruption after 29 ports on the US West Coast, including the two busiest ports in the country, were partially shutdown over the weekend.

US docks face 4-day shutdown

An on-going dispute between the Pacific Maritime Authority (PMA) and the International Longshore and Warehouse Union (ILWU) over contracts and working conditions, has led to major delays in the loading and unloading of cargo.

The disruption reached its peak on Sunday morning, with approximately 34 container ships anchored along the Californian coast waiting for access to the ports of Los Angeles and Long Beach.

Labour Dispute

The PMA and ILWU have been locked in contract negotiations since the end of June last year, when the previous contract ended.

Unfortunately, relations between the two parties have soured, with the PMA accusing the ILWU of a deliberate slow-down of work in recent months, something that the ILWU has attributed to changes in practices by the shipping companies. With neither side willing to back down, negotiations have stalled.

In response to the slow-down, the PMA took the decision to suspend port operations for six weekend and holiday days in February, stating that they were unwilling to pay the high overtime rates for weekends and holidays when productivity was so low.

With conservative estimates placing the cost to the US economy at $2 billion per day, President Obama has sent Labour Secretary, Tom Perez, to get negotiations back on track and a deal in place.

Supply Chain Pressures

However, even if a deal is agreed soon, it could take anywhere between two and six months for port activities to return to normal levels. This would then lead to a far greater impact on supply chains already experiencing severe delays to deliveries of a wide range of goods, including agricultural produce, car parts and clothing.

Exports of fresh produce to Asia have been heavily impacted, with many US suppliers now looking to domestic markets for sales as other customers cancel orders. There are also concerns that many retailers will be unable to stock spring clothing lines, leading to lower incomes over March and April.

In the car industry, both Nissan and Toyota have been forced to airfreight parts for US manufacturing operations due to the disruptions. Honda has also confirmed a slow-down in US production due to shortages of parts normally shipped from Asia to the West Coast.

Lack of contingency

There are concerns that many of the companies affected don’t have the necessary contingency plans in place to mitigate the risks of the disruptions. It is felt that many were unprepared for the dispute to last as long as it has and that it has left companies exposed to the delays.

Although some companies like Nissan and Toyota have been able to take steps to mitigate the disruption by using other transportation methods, others have not been able to act in the same way, compounding the delays in the supply chain.

One high-profile victim of the dispute is McDonalds. As Procurious reported earlier this year, the disruption at the coastal ports lead to shortages in produce exports and rationing of fries in Japan. This was a contributing factor to the company’s first full-year loss in the region in 11 years.

For more on this story, follow these links:

http://www.supplychaindigital.com/supplychainmanagement/3831/What-happens-if-the-US-ports-keep-closing

http://www.usatoday.com/story/money/cars/2015/02/14/asian-automakers-parts-cars-port-strike/23380041/

http://www.ft.com/cms/s/0/2be1ed0a-b23a-11e4-80af-00144feab7de.html#axzz3Ru37cVTq

Read on for the other procurement and supply chain stories making the headlines.

Heathrow Airport procurement director offered exec committee place if he ‘reshaped’ function

  • Ian Ballentine, procurement director at Heathrow Airport, was offered a seat on the executive committee if he could “reshape” the function within a year of joining the firm.
  • Ballentine joined the firm in November 2012, and in late 2013 he joined the committee. He said: “I took the job here because the previous chief exec said: ‘I need someone to come on board and really reshape procurement for what I think it can become in an organisation, and if within a year you can demonstrate you can do that then I will give you a place on the board’.”
  • Ballentine started out in charge of procurement for the operations division of Heathrow, but following his success his role was widened to include the remaining IT and construction divisions in a new merged function. His work revolved around changing perceptions of procurement as being “bureaucratic”, “slowing things down and not adding value” to “really demonstrating the savings off the bottom line”.

Read more at Supply Management 

Food chain is an easy target for criminals, says safety chief Alan Reilly

  • Food fraud is still seen as an easy target for criminals and the authorities are not organised enough to tackle the criminals, the outgoing Food Safety Authority of Ireland(FSAI) chief executive Alan Reilly has said.

  • Prof Reilly said food companies must have a threat assessment procedure in place to identify where the food supply chain could be vulnerable to fraud.

  • “The longer that food chain, the more things that could go wrong and the more opportunities for criminals to get in and do things like food substitution and animal species substitution, to bulk out products, to dilute down high-value products like olive oil and so on,” he said.

  • “The food chain is still seen as an easy target for criminals. There is big money to be made in food fraud and at the present moment I don’t think we are organised enough to tackle some of the criminals out there. It does need co-operation across all the agencies of the State, gardaí, customers and the food regulators have to work together to tackle the problem.”

Read more at The Irish Times

BT’s ‘near-monopoly’ on rollout of rural broadband sparks concerns

  • Plans to put a publicly-funded £45.5million superfast broadband contract on to the open market were abandoned after BT refused to bid and left only two potential bidders, a leading member of the project team has revealed.
  • Commissioning group Connecting Devon and Somerset had said last year it would launch a tender process which would take coverage up to 95 per cent of all properties.
  • A previous £94 million contract with BT only promised that 90 per cent of businesses and residents across the two counties would see data transfer speeds increased by 2016.

Read more at Western Morning News

Church charity to research FTSE 100 supply chain slavery links 

  • A church-based charity is to lead research aimed at uncovering potential links between human trafficking and the supply chains of FTSE 100 companies.
  • The study by Us, with the help of Finance Against Trafficking, Ecumenical Council for Corporate Responsibility (ECCR), and Rathbone Greenbank Investments, is motivated by concerns the companies may inadvertently become involved in human trafficking through links with suppliers around the world.
  • Rachel Parry, global relations director for Us, said: “We want to see FTSE 100 companies better informed to help them ensure there is as little risk as possible that their supply chain is somehow touched by the traffickers’ trade.”

Read more at Supply Management 

Supermarkets should encourage small suppliers, not bully them

  • The news that the grocery industry watchdog is investigating Tesco over its alleged mistreatment of suppliers is unlikely to have shocked many. Supermarkets aren’t renowned for treating their suppliers well – particularly those small businesses that don’t have the muscle to put up a fight against unfair contracts and late payments. And as margins shrink in the groceries sector, the supply chain represents an obvious target. The insolvency specialist Begbies Traynor reckons as many as 100 food and drink manufacturers could go bust this year because of the supermarket price war.
  • The irony is that all the evidence suggests consumers are looking for more choice in their supermarket shopping – not ever more brands of washing powder or baked beans, but new products and new product categories. The supermarkets need more innovative smaller suppliers offering artisanal products, not fewer, yet their behaviour is driving firms out of business.
  • Research sponsored by the online grocer Ocado underlines the point. Its poll of shoppers, conducted by YouGov, found that 38 per cent actively seek out small label products when they’re in the supermarket and that 51 per cent rely on their supermarket to introduce them to new products. A third said they were more likely to shop in a supermarket they believe is supportive of smaller businesses.

Read more at The Independent

Kimberly-Clark names SVP global supply chain

  • Kimberly-Clark Corporation has appointed Sandra MacQuillan, 48, to the newly created position of SVP, Global Supply Chain. MacQuillan joins K-C from Mars Inc., where she served as Global Vice President, Supply Chain for Global Petcare. She will be joining K-C in the second quarter.
  • With her appointment, MacQuillan will have global responsibilities for procurement, transportation, continuous improvement, sustainability, and quality, safety and regulatory operations. Labor relations and workforce issues across product supply will also be coordinated at a global level. She will also lead the company’s Global Supply Chain Council, which will be comprised of supply chain leaders from across the globe, and will build the next generation of supply chain capability at the company. She will report to Thomas J. Falk, chairman and CEO, and become a member of K-C’s global senior leadership team.

Read more at Consumer Goods Technology

5 factors to consider when deciding on a supplier

What are the top 5 factors you consider when deciding to partner with a supplier?

Factors to consider when choosing a supplier

The second part of the discussion wrap this month looks at the factors that are considered when deciding on supplier partnerships. The top five factors were (in no particular order):

  • Cultural Fit – including values
  • Cost – covering price, Total Cost of Opportunity (TCO)
  • Value – value for money and value generation opportunities
  • Experience in the market and current references
  • Flexibility
  • Response to change – in orders and products
  • Quality – covering product and service quality and quality history

Okay, we know that’s seven but it was hard to split a couple of the more popular ones!

Other factors suggested by the community included trust and professionalism, strategic and process alignment and technical ability.

The final factors are worth investigating in more detail. It’s critical to have executive level buy-in from both sides otherwise it can cause the relationship to stall. Supplier innovation should also be considered, particularly in line with any cost-cutting or process streamlining efforts by the supplier, as this may in turn lead to value creation for the purchasing organisation.

Finally, it was recommended that buyers should be aware of the breakdown in business percentage on both sides. You neither want to represent a high percentage of the supplier’s business, nor do you want to rely on the supplier too heavily.

For more on this theme, check out the following articles:

The Importance of SRM – https://www.procurious.com/blog/in-the-press/three-key-insights-on-the-importance-of-srm

Take a ‘joined-up’ approach to logistics – https://www.procurious.com/blog/in-the-press/in-logistics-take-the-joined-up-approach

Considering the Right Outsource Partner – http://www.fronetics.com/7-things-consider-choosing-right-outsource-partner/

Meeting of minds in pharmaceutical purchasing

The Beyond Group AG (“TBG”) will be launching its 2015 Productivity-in-Pharma Think Tank, building on the success of their 2014 gathering of minds of senior procurement leaders in the industry.

Productivity Think Tank from the Beyond Group

Kicking off in Frankfurt Germany on April 21, three separate day-long sessions (concluding in September) will help frame the discussion of what is the future of Procurement within the Pharma industry over the next several years.

Drawing together a select group of procurement professionals representing 15 of the world’s leading Pharma companies, TBG and its partners (EY [Ernst & Young], Korn Ferry, UBS, and others) will deeply explore the issue of “Transforming the Procurement organization to become a recognised productivity engine”.

The 2015 series promises to be the most intensive, content-packed, and insightful of this groundbreaking series.

Contrasting with the traditional conference environment, TBG’s Think Tank gatherings offer ‘learning collaboration’ through in-depth & insightful exchanges among industry peers, academics, thought leaders and practitioners. These intensive sessions build upon experience, expertise, and research in a closed-door environment where executives can really get into the detail of their challenges and aspirations. From this gathering of minds, TBG publishes key findings, generates new research and creates a close community of leaders who explore the biggest opportunities to develop Procurement’s role.

Conceived by Giles Breault and Sammy Rashed, principals and co-founders of The Beyond Group AG, the Think Tanks have quickly evolved into a new model where “content is king” and outcomes are published and presented to the wider procurement community. Some of the feedback gathered from previous participants include:

“The Productivity Think Tank concept is a great opportunity bringing together a focused group of international peers around a relevant topic. Half-way between a symposium and structured meetings with peers, the Think Tank combines the benefits of both worlds with deep analysis, strong networking, useful outcomes, and applicable takeaways”

“It’s a mix of academic expertise, real world experience and cross-industry best practices which allows us to collectively create solutions that fundamentally change the way we look at procurement and value its contribution”.

This year’s European series is limited to a maximum of 15 member companies. It will be followed a new series for the North American region this fall and expanding to the Asia market in 2016.

For more info please contact us at [email protected] or visit our website at www.beyondgrp.com.

Straw houses: no need to fear the Big Bad Wolf

We’re all familiar with the tale of the three little pigs and how the Big Bad Wolf blew down the first little pig’s house, a questionable dwelling built entirely from straw.

First straw house goes on sale in UK

Apart from having us wonder how it stood up in the first place without a frame, we all grew up knowing that a house made of straw was a bad idea.

However, an engineering research project in the UK is showing that maybe the little pig was ahead of his time in construction innovation. This week, the first straw houses offered on the open market in the UK are up for sale.

So huff and puff as much as you like, but you’re going to have to try harder than that to blow these houses down!

Building with bales

The research project was the brainchild of the University of Bath and Modcell, a specialist architectural firm. The hope is that the research, and the subsequent sale of the houses in Bath, will lead to the wider use of straw bales in construction.

The benefits of using straw are worth noting. Straw bale houses are more environmentally friendly to build and maintain than traditional brick houses and with proper care, the house will last for up to 100 years.

As straw is a natural material, the requirement for the production of raw materials will be reduced. This will in turn lead to a lower carbon footprint for the supply chain as the processes for manufacturing cement and firing bricks, both of which require high energy usage and generate substantial waste, will not be required.

Straw can be sourced relatively easily. Each year, UK agriculture produces an estimated four million tonnes of straw, of which only a small proportion is used, with the remainder just being burned. A new house would require seven tonnes of straw to build, meaning that there would be a potential to build half a million new homes from the straw produced each year.

Not only are the building method and supply chain more environmentally friendly, but also the houses themselves have significantly lower running costs and environmental impact. The bales provide highly efficient insulation and retain heat more effectively than their brick counterparts. The expectation is that the houses in Bath will have energy bills that are up to 90% lower than similar houses in the area.

Innovative construction

In recent years, the construction industry has made significant strides to reduce the environmental impact of and waste in its supply chain. Innovations have included:

  • The ‘house in a box’
  • The use of recycled materials in concrete – leads to reductions in fossil fuel and greenhouse gas production, rain acidification potential and waste
  • Bio-based composite building materials
  • Roof tiles that remove nitrogen oxide from the atmosphere

It’s hoped that these innovations, plus the potential for a wider market for straw houses, could lead to a much more sustainable supply chain and industry as a whole.

For more on the straw houses go to http://www.modcell.com/.

Read on for more of the biggest stories commanding headlines right now:

New guidance aims to keep products of pirate fishing out of UK supply chain

  • Illegal “pirate” fishing damages the environment and human rights, and leads to economic losses of as much as $23.5bn (£15.3 bn) a year, according to fresh guidance which aims to help British businesses keep illegal fish products out of the supply chain and stamp the practice out.
  • A briefing published by retailers, conservation and human rights groups sets out in full how retailers and suppliers should act to end the long-term threat to the oceans, while building up legal and sustainable fisheries.
  • The briefing by the British Retail Consortium, Environmental Justice Foundation and WWF UK is to inform UK industry, retailers and brands of the risks associated with illegal, unreported and unregulated or pirate fishing. It offers advice on risk-assessment and mitigation, and encourages action to prevent illegal fishery products entering UK supply chains. As much as 26 million tonnes of illegal fish products is involved annually.

Read more on The Guardian

Fresh row for Tesco as supermarket giant demands suppliers cut prices as food commodity values fall

  • Tesco risks a fresh dispute with suppliers after it demanded they cut their prices or risk being dropped from supermarket shelves.
  • The grocer has written to suppliers asking them to reflect recent falls in the cost of commodities such as wheat and sugar. In some cases, those who do not decrease their prices have been told they risk being ditched by the supermarket in favour of cheaper rivals.
  • The revelation comes only days after the grocery giant faced a fresh investigation into claims that it bullied firms that it buys goods from. A probe by the supermarkets watchdog the Grocery Code Adjudicator has begun over allegations it charged huge sums to place suppliers’ wares on prominent shelves, even if they were not on promotion.

Read more at This Is Money

How Will Global Supply Chains will be Impacted by Obama’s Budget?

  • In his 2016 budget plan, to be unveiled today, President Obama will propose that U.S. companies’ overseas profits be taxed to fund a major boost in infrastructure spending. These tax proposals could change the way the Tax Efficient Supply Chain (TESC) operates.
  • When highly profitable companies pay little in the way of taxes, negative press coverage can ensue.  But CEOs are asked by financial analysts about their corporate wide effective tax rate (ETR) all the time. This can be a no win situation for a CEO. A company with a high effective tax rate is at a significant disadvantage to industry competitors with low tax rates, particularly in the company’s ability to grow the business. And ultimately a CEO’s tenure is often most strongly impacted by the financial community’s view of his company’s performance.  Not surprisingly, many large companies have restructured to lower their tax burden; it is not unusual for these companies to lower their ETR by about five percent.
  • While supply chain cost savings fall to the pretax bottom line and improve a company’s Net Income position, corporate tax restructuring increases deferred revenues.  Some large corporations are sitting on tens of billions in deferred earnings that can’t be used for stock owner dividends, without being taxed at US rates, but can be used to fund growth and thus future earnings, in a variety of ways.

Visit Logistics Viewpoints to read more

Distribution demands drive investment in logistics properties

  • Ecommerce is fuelling a boom in logistics property investment in Europe, as retailers try to keep pace with changing consumer demands.

  • Investors pumped €19.8bn into properties such as warehousing and distribution hubs in 2014, a seven-year high and a 34 per cent jump year on year as companies scramble to adapt to evolving supply chains and developers position themselves to profit from the thriving sector.

  • The UK led the way, with investment in the sector jumping 65 per cent to €7.9bn, according to Property Data. But investment accelerated on the continent too, as European eretailers expanded and cross-border ecommerce took off.

  • “You’re doing the stuff inside the distribution centres that you used to do inside the shop . . . Companies are having to reorganise their distribution logistics,” said Alan Braithwaite, chairman of LCP Consulting.

Read more at the FT.com

The businessfriend platform offers new way for supply chain execs to do business

  • In a world full of technology, it can become a hectic existence trying to wade through the myriad of business apps as part of your day-to-day working life. But there is a new platform on the horizon which could solve this issue for supply chain executives.
  • Businessfriend is the one-stop communications channel that helps you stay connected with the people and professionals that matter the most to you. Whether that be warehouse operatives, production line managers or managing directors. Consolidating the noise with one effective business communications platform, businessfriend launched on 6 January during the three day CES event in Las Vegas, and it promises to redefine how business is done in the supply chain sector.
  • Glen White, Founder and CEO of businessfriend, said: “On any given day, the typical young professional can have as many as five platforms open to get them through their day. “We offer one complete forum that enables constant connectivity for optimal business communications. One mobile app, one desktop, any device – no more juggling apps.”

Read more at Digital Supply Chain

McDonald’s and the Challenges of a Modern Supply Chain

  • Recently, McDonald’s, the world’s iconic largest food service provider, has been (forgive the cliché) through the grinder. Poor performance has led to the departure of its CEO and plenty of critical attention in the business pages. Part of this story relates to the provenance, or origins, of its products: Chains that provide more upmarket “fast casual” dining such as Panera, Chipotle, and Shake Shack have brands that speak of freshness, health, and trustworthy sourcing.
  • In 2010, I wrote an HBR article predicting increased interest in supply-chain transparency: firms needed to develop strategies for knowing and explaining where stuff comes from. Since then the idea of product provenance has steadily crept up the corporate agenda and is now a compulsory issue for boards and governments. In the UK, for example, legislation is in progress that would build on the California Supply Chain Transparency Act, potentially applying to wider range of firms. Across Europe, the 2013 horsemeat scandal generated widespread panic about contaminated meat. In a wide range of industries — electronics, software, toys, aerospace — provenance is increasingly a critical concern.
  • McDonald’s woes offers three lessons for others about supply-chain transparency. Visit Harvard Business Publishing to read them.

How to navigate the tricky path to procurement accreditation

Procurement accreditation and qualifications

At Procurious, we are all about changing the face of procurement and encouraging and engaging with the next generation of procurement professionals.

Discussion wraps allow us to consolidate the knowledge of the whole community and keep the conversation going on the key issues and themes.

Achieving and Leveraging Professional Accreditation

People are constantly looking to develop personally and professionally. A number of questions have been asked about accreditation – routes for achievement, how it can be leveraged, is it worth it and how to get into it.

There are a few routes for accreditation open to procurement professionals, with the most common being CIPS through study and exams, an MSc through an accredited university or distance learning.

While there was no consensus on the best route to take, there was a consensus that having these qualifications and being a member of CIPS was necessary for procurement professionals and often used as a requirement for recruitment.

Things to consider when selecting a route were:

  • Practical application
  • Acceptability in your organisation
  • Balance of theory vs. practice
  • What your long-term career goals are
  • What you as an individual want to do

One of the agreed themes was that many organisations would sponsor studying through the CIPS route, as they push for their departments to be adequately qualified.

Having achieved MCIPS, or other accreditation, the question was could you leverage it in salary or promotion negotiations.

The consensus from the community was that these qualifications added value to your personal offering, but that having them would not normally lead directly to an increased salary in isolation.

It was important to demonstrate improvements, highlight practical applications and present a track record of accomplishments to managers in order to properly leverage qualifications.

For more on routes to MCIPS, go to the CIPS website: http://www.cips.org/en-GB/membership/What-is-MCIPS/Routes-to-Membership/

For distance learning opportunities, check out the recommendation from the community of Canban: www.canban.org

What is going on with the Swiss franc?

In a move that has hurt skiers, chocolate lovers and international investment banks alike, the Swiss National Bank (SNB) decided on January 15th to unpeg the country’s currency, the franc, from the euro.

What's going on with the Swiss franc?

Update – Since the time of writing the Swiss National Bank has signalled it will target a new exchange rate band, to find out more click here 

The repercussions of this decision have reverberated across the globe. Despite The Wall Street Journal reporting that J.P Morgan (an investment bank) stands to make up to $300 million USD as a result of the decision, the news for most financial agencies has been overwhelmingly bad.

Citigroup, suggested its losses will be in realms of $150 million USD and exchange agencies from New Zealand to New York City have hinted that troubled times and closures lay ahead after the unexpected currency shuffle.

Even English football has been impacted, with the jersey sponsor of West Ham United, Alpari UK (a foreign exchange dealer), filing for insolvency.

Currency changes and international finance have never been subjects I’ve been comfortably able to wrap my head around. So I have tried to tackle the unpegging of the franc from an entirely pragmatic point of view. What happened? Why did it happen? And what is the impact on procurement professionals?

Why was it pegged in the first place?

The Swiss government has traditionally been seen as a sound custodian of financial affairs, its stable government and balanced economy has seen business and investors flood the country with foreign cash. While this sounds like good news, the tide of foreign money drove up the value of the franc, which had a severe impact on the country’s significant export sector. Essentially, Swiss goods became expensive, too expensive.

In 2011, as European consumers remained dormant in wake of the credit crunch, the Swiss National Bank made a perhaps short-sighted decision to peg the value of the franc to that of euro, thus making Swiss goods more affordable across the continent.

Why did they unpeg it?

A number of different theories have been banded about as to why the bank elected to unpeg the franc – some of the more popular are listed below:

  • The SNB held fears that the consistent devaluation of the euro (in recent months and years) would be detrimental to the Swiss economy. This uncertainty is supported by political instability in some of the Euro zones more debt-laden countries.
  • The SNB was pre-empting the European Central Bank’s decision to introduce another quantitative easing program and decided that the printing of money required to carry out this program would further weaken the euro.
  • The SNB was responding to public concerns that the enormous $480 billion USD of foreign currency the bank now holds (as a result of its euro pegging) could lead to higher inflation levels, or even hyper-inflation.

Potentially, the bank simply wanted to unmake a poor decision it made in 2011. As the Economist magazine suggests, “When central banks manipulate exchange rates, it almost always ends in tears”.

What should procurement teams do? 

Whether the euro pegging was a good idea or a bad idea is now irrelevant, what we are left with is a situation where the Swiss franc is worth significantly more than it was two weeks ago. The valuation of the franc is likely to fluctuate further in the coming weeks, but experts are predicting it will remain high against the euro and other currencies.

Below are some points procurement teams should consider addressing when determining how this currency shift will impact their operations:

  1. Understand the exposure of your supply base to the Swiss franc. If you have got strategic suppliers based in Switzerland, their products and services have just got significantly more expensive, perhaps its time to look for substitutes.
  2. Understand your company’s internal exposure to the Swiss franc. The secure economy and friendly tax rates in Switzerland encouraged many international businesses to set up their European operations in the country. As a way to reduce their exposure to the now expensive franc, these businesses (as well as many native Swiss firms) may now be looking to ‘internally restructure’ as our friends in HR like to say.
  3. Prepare for a more competitive outsourcing environment. Swiss companies (and international firms with a Swiss presence) could try to minimise the impact of the strengthening franc by leveraging lower cost destinations and start outsourcing more work.

How is the changing value of franc impacting you? Fill us in on your concerns in the comments below.