Category Archives: Procurement News

Supply chain finance schemes: a worrying new trend?

Diageo under fire for increasing payment terms

Diageo under fire for increasing payment terms

The Forum of Private Business (FPB) has this week launched a scathing attack on beverage giant Diageo over its plans to extend supplier payment terms from 60 to 90 days in its UK business.

Diageo let suppliers know, via a formal letter, that the payment terms changes would come into effect as of February 1st 2015. The firm announced that the new terms make up part of a “different procurement process” the company plans to implement for future tenders.

Diageo justified the move by stating:

“Diageo continually looks for ways to enable us to invest in the growth of our great brands. This activity supports the long term sustainability of our business and yours.”

Speaking on Diageo’s move to extend payment terms, Phil Orford, the chief executive of The FPB said: 

“We are very concerned, but sadly unsurprised, to learn that Diageo is yet again extending its payment terms, a practice that is hugely damaging for small businesses.”

Countering criticisms that lengthening payment terms will be highly detrimental to small and medium size enterprises in the company’s supply chain; Diageo announced that it would offer supply chain finance programs to any businesses adversely impacted by the new terms.

Supply chain finance programs allow suppliers to access money they are owed more quickly by leveraging the favourable credit lines of larger buying organisation.

In response to this move Mr Orford claimed:

“The practice of big businesses using a supply chain finance scheme in order to extend payment terms and protect their own cash flow is a worrying trend that is spreading across sectors and industries.”

The FPB is now working with the Institute of Credit Management and Department of Business Innovation and Skills to have Diageo’s status as a signatory to the Prompt Payment Code revoked.

The WEF 2015 – where, why and what happened?

“Social media has created a historical shift from the historically powerful to the historically powerless. Now everyone has a voice.”

Sheryl Sandberg, COO and Member of the Board, Facebook at the WEF, Davos, 2015

The World Economic Forum in Davos

The World Economic Forum

Unless you have been deliberately avoiding the news over the past week, you’ll be aware that The World Economic Forum has just taken place in Davos.

What is it?

According to the founder, Professor Klaus Schwab, the Forum is “a platform for collaborative thinking and searching for solutions, not for making decisions”.

What this means is that business leaders, thought leaders and politicians, as well as some celebrities, gather together to share ideas with the intention of bettering the world.

Does it work?

The jury is still out for many people. A lot of people look upon the event as a who’s who, rich-list party in the Swiss mountains, others that there isn’t enough tangible output from an event able to gather together a group of individuals with sizeable clout.

However, if these leaders leave Davos with fresh ideas on how to solve the major issues in the world, then, for the rest, the Forum will have fulfilled its purpose.

What were the major topics this year?

Key topics on the table this year included the falling price of oil, the Greek election, a growth agenda for Africa, how technology is changing our lives and what the future holds for Iraq. Check out www.weforum.org for the full programme.

Is there anything we take away?

From a Procurement point of view, we know that there were discussions around procurement efficiency on the agenda (as part of wider topics), as well as the business role in environmental sustainability. We should hear some details coming out over the next few weeks.

As we also reported on Procurious, the WEF raised the issue of cyber security. It certainly got people talking about what they needed to be doing and even came close to a consensus on an idea for a global body that sets cyber-security standards.

Otherwise, we would encourage you to check out some of the video content on the WEF website. For one thing, we’ll probably never have the chance to see Pharrell Williams on stage with Al Gore again!

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

DHL Express launches helicopter delivery service

  • DHL has launched a helicopter delivery service in the UK that promises next day delivery on packages from New York, Boston and Chicago. The new service, a first for the UK, will ferry up to 300kg of packages between London’s Heathrow Airport and major London business district Canary Wharf.
  • Fully operational from February, it follows similar operations launched in New York and Los Angeles.
  • “This new service from DHL Express offers even greater speed and reliability to our customers,” John Pearson, chief executive of DHL Express Europe said. “For the financial and professional services sector in particular, time really is money, so we are always looking for innovative, more efficient ways to move our customers’ shipments.”

Read more at Arabian Supply Chain

FSB tackles supply chain bullying at Whitehall

  • The Federation of Small Businesses (FSB) has hosted a cross-party group of MPs to identify possible solutions to the deterioration of payment practises in the UK.
  • Recent research by the FSB revealed that almost one in five small businesses had been subject to some form of poor payment tactics recently.
  • FSB national policy chairman Mike Cherry said: “It is simply unacceptable for any company to exploit its market position to enforce unfair and unreasonable payment terms. The money outstanding in late payments is in the billions and has consistently grown larger and larger. We need greater leadership from all parties competing to be in the next government to toughen up the prompt payment code and improve the UK’s payment culture.”

Read more at PRW.com

China smartphone supply chains estimate demand to pick up in March

  • China smartphone supply chain makers estimate they will begin shipments for new devices following the Lunar New Year period as local handset vendors remain concerned over clearing out inventories through the early part of first-quarter 2015.
  • Smartphone shipments were lower-than-expected in the China market during the second half of 2014, which many makers attribute to lagging 4G development and a lack of smartphone subsidies from local telecom providers in China. This led to a pile up in inventory, which vendors are now trying to tackle throughout the 2015 Lunar New Year period when sales are expected to get a boost.
  • Supply chain makers are optimistic, however, that shipments will pick up by March, and estimate that most handset replacement demand from consumers in China during 2015 will be for handsets sized 5-inch and above. Shipments will further pick up going into the second quarter, the makers noted.
  • Many supply chain makers believe that China handset vendors’ shipments will increase 17 per cent in 2015 as the vendors tackle low-priced solutions in emerging markets. Global smartphone shipments in 2015 meanwhile are estimated to grow 12 per cent to around 1.3 billion.

Read more at Digitimes

Top 10 supply chain CEOs of 2015

Supply Chain Digital has published a list of its top 10 supply chain CEOs for the year ahead.

[In ascending order] it named Nills S Andersen of Maersk, Dr Frank Appel of Deutsche Post DHL, and Frederick W. Smith of Fedex in its top 3.

To see the full list (along with selected career highlights from those included) head over to http://www.supplychaindigital.com/top10/3800/TOP-10-SUPPLY-CHAIN-CEOs-2015

How Tesco uses the cloud to work with its suppliers

  • Tesco is using online trading partner community solutions to embrace and extend its Oracle ERP and procure-to-pay systems and has significantly increased automation levels in their B2B e-commerce network during the last twelve months.
  • As a result Tesco has reduced the time to set up and approve new suppliers by 66 per cent.
  • With the help of GXS, Tesco has tackled the challenges that have, in the past, prevented some of its trading partners from adopting EDI. Tesco has significantly increased automation levels in their B2B e-commerce network during the last twelve months.

View the full findings of this case study at Supply Chain 24/7

 

Does procurement have a role to play in cyber security?

In the past few months alone there has been a significant number of cyber attacks on high profile targets including Sony Pictures, celebrities’ phones and personal computers, and, just recently, an attack on the US Military Command’s Twitter account.

Procurement's role in cyber security. Image Flickr

Now, as the World Economic Forum labels emerging technologies as one of the major global risks for 2015 in light of these attacks, we consider what procurement can do to aid organisational efforts in cyber security.

How big a worry is this?

If the WEF is highlighting it as a major global risk, then it’s certainly something to be taking seriously. Emerging technologies will allow hackers and cyber terrorists to carry out attacks that are more sophisticated and harder to stop. Additionally, there is a reported increasing skills shortage in cyber security personnel, expected to peak in 2017.

However, it’s not all bad news. The high-profile attacks have helped increase the focus on this subject. As a result, the UK Government has issued advice and information to organisations to help them be cyber-safe, as well as signing up to a second US-UK Cyber Security Innovation Summit. There are also now cyber governance health checks and a Cyber Essentials Scheme available to help organisations.

Procurement’s Role

A representative from the organisation that compiled the WEF report, Marsh & McLennan Companies, was quoted as saying “As a company you are not protected [against cyber attacks] unless your supply chain is protected.”

So what can Procurement do to help? Individually, you can do everything you would do to protect your personal accounts and computers:

  • Report all phishing and suspicious e-mails
  • Don’t click on links in e-mails unless you are sure of the source
  • Be wary of unsolicited e-mails asking for information

There are other steps that you can take as part of an organisation to assist with the overall security

  • Ensure your knowledge is up to date by attending conferences
  • Work with suppliers to put security plans in place
  • Make security plans part of your evaluations
  • Take responsibility in your team for checking and ensuring compliance
  • Investigate the Cyber Essentials Scheme

By making this part of day-to-day activities, procurement can do its bit to make organisations more secure.

Biggest Global Challenges in 2015https://www.procurious.com/blog/trending/what-are-the-biggest-global-challenges-in-2015

Cyber Security Boosthttps://www.business-cloud.com/articles/news/cyber-security-boost-uk-firms

Cyber Essentials Scheme (UK)https://www.gov.uk/government/publications/procurement-policy-note-0914-cyber-essentials-scheme-certification

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

Supply Chain woes help doom Target in Canada

  • Minneapolis-based Target Corp. said Thursday it was shuttering its 133 stores in Canada, laying off 17,000 workers and placing its Canadian operation under bankruptcy protection.
  • “While this is a difficult decision, we believe it is the right one for Target,” Brian Cornell, Target chairman and chief executive officer said in a press release. “We had great expectations for Canada but our early missteps proved too difficult to overcome.”
  • New York Times article Friday said that supply chain problems helped doom Target’s operations in Canada. “Differences in suppliers and other factors meant that Canadians found Target’s Canadian stores to be more expensive than they anticipated, and a poorly executed distribution network meant that shelves were often missing basic products,” according to the Times.

Read more on CFO

Troubled McDonald’s Japan to put CFO in charge of supply chain 

  • McDonald’s Japan Holdings Co is putting its chief financial officer in charge of its supply chain, according to an internal email seen by Reuters.
  • The move comes after foreign objects were found in customers’ food, the latest trouble for a fast-food chain hit by sliding sales and a shortage of french fries.
  • Andrew Brough, senior vice president and chief financial officer, will take over the company’s Supply Management Division from Feb. 1, the Friday email from CEO Sarah Casanova said. The email does not say who was previously responsible for the supply chain.
  • Hidehito Hishinuma, senior vice president and chief support officer, has in recent days appeared at news conferences to discuss the company’s procurement, in one case apologizing for the objects, including a tooth and plastic, getting into food.

Read more at Business Insider

Yusen Logistics expands Sydney operations

  • Yusen Logistics Australia has announced that it will open its sixth Sydney warehousing facility this month. The site is at Greystanes in Western Sydney and is ideally located for all major arterial routes.
  • The new warehouse, which is dedicated to a major US retailer, consists of 12,500 square metres and will comprise 18,500 pallet locations. Operations will commence immediately.
  • Yusen Logistics’ Managing Director for Australia, Ian Pemberton said: “This additional facility continues the expansion of our portfolio in line with our three year growth strategy, and demonstrates our commitment to increase the range of international clients to whom we provide supply chain solutions. The capital investment is in excess of $2 million Australian dollars and the facility will employ an additional 25 Yusen staff.”
  • Yusen Logistics Australia is a leading provider of supply chain and transport solutions with over 26 years of service in Australia and revenues of over $125 million Australian dollars in 2014. The business has 12 offices throughout Australia with 420 people covering international freight forwarding, in-house customs clearance and contract logistics (warehousing and distribution) services.

Read more at Supply Chain Digital

Jailed Military procurement official blackmailed

  • Former Greek secretary general for military procurement Yiannis Sbokos is being blackmailed by a fellow convict, revealed a Greek police case file. Sbokos has been in prison for the last two years, since his conviction for money laundering.
  • According to the case file, Sbokos is being blackmailed by a convict (Yiannis Sk.) who found out that the former Greek government official had 10 million euros in cash. Yiannis Sk. allegedly received this information from Akis Tsochatzopoulos, fellow convict and former Greek Defense Minister.
  • Yiannis Sk. allegedly threatened Sbokos, requesting part of the money. However, when the former official refused, his fellow convict attempted to bomb his house in Athens.
  • Sbokos and Tsochatzopoulos were imprisoned after it was revealed that they had received multiple bribes for arms deals during their time at the Ministry. Furthermore, it was revealed yesterday that Tsochatzopoulos had ordered a bombing attack against Sbokos.

Read more at Greek Reporter

Thailand drafts public procurement law following UNDP review

  • The Thai government is drawing up legislation to manage the risk of corruption in public procurement, following the UN Development Programme’s ‘integrity risk assessment’ of the country’s public purchasing system.
  • The assessment found evidence of “weak integrity in public contracts” and a concentration of improvements in public services in Bangkok and the central region, leaving “significant deficiencies” in other parts of the country.
  • Risks to integrity in Thailand’s non-regulated public procurement process are “rife” because of the large amounts of money at stake and the interface between the government and private sector, which is characterised by a high volume of transactions.
  • The assessment was conducted as part of the ‘Mitigating Risks to Integrity in Public Procurement project’, established by UNDP Thailand with key stakeholders in the Thai Government, including the Offices of Public Sector Development Commission and Public Procurement Management Department and the State Enterprise Policy Office.

Read more on Supply Management

What’s got you motivated in 2015?

Thanks to everyone who has been contributing to the Discussion forum, both in asking and answering questions. We really appreciate the contributions, as do those people who are posing the questions.

What's got you motivated in 2015?

As it’s a new year, we’ve picked out a few popular questions on topics you might be considering as part of your professional and personal goals this year.

As ever, we’ll be linking these discussions to our great blog content so you can get further into the topics and read more about them.

What’s got you motivated in 2015?

This question looked at both the personal and professional side of people’s aims for the coming year.

On the personal front there were some interesting and enviable responses. Procurious HQ will admit to being jealous of Peter’s travel plans, while agreeing with Antoinette in hoping that all our members will be enjoying time with friends and family. And don’t worry Georgia – none of us are particularly green-fingered either!

Professionally, 2015 seems to be a year for development. A couple of common threads were social media and digital strategies and how these are going to impact working lives. The use of social media is on the rise in organisations and many are looking at specific strategies to manage their profiles and presence.

At Procurious, we think there’s a great chance for procurement to be an early adopter and lead the way for businesses. Why not think about a Procurious workshop on social media for procurement.

Also on the professional front, motivations for 2015 included fresh starts, either in a new role, or after some time off (good luck, David!), increasing the profile of public procurement, developing skills through e-Learning and removing silos in businesses through working on internal relationships.

Also remembering the importance of external relationships, networking and meeting fellow Procurians!

Tips to stay on track – make a plan, don’t make excusesrespect your abilities and chipping away at your goals.

I will be starting out as a new face in procurement in May 2015. Any advice on how I can and should be preparing myself?

We’ve all been there at the start of a new job or when we moved into procurement, so unsurprisingly this question was well answered.

Top answers from the community included:

  • Reading about procurement and your new company and understanding their policies and processes
  • Never being afraid to ask questions (there is no such thing as a stupid question!)
  • Speaking to experienced professionals to learn from them
  • Finding a mentor to help you out

Social media can play a big part in this process too. It allows you to connect with and ask questions of experienced professionals, develop your knowledge through eLearning and follow news stories – either via industry publications or #procurement on Twitter.

Other things the community suggested included:

  • Finding templates for policies and processes
  • Understanding how the procurement process fits in the organisation
  • Getting your hands dirty straight away and get out and see the other functions
  • Performing basic spend analysis to help give you a quick overview of the company spend
  • Thinking about the end-to-end process including sourcing and assessment of vendors, payment and delivery terms, risks and how to mitigate/manage them.
  • Remembering that your face and your voice are the ones of your company

It’s often overlooked that it can be challenging starting a new role or in an unfamiliar profession and, as a result, individuals can struggle to adjust to new ways of working or feeling like they are capable.

However, these tips aren’t just for new starts. Even people who have been in procurement for a longer period of time can still learn from this and put these tips to good use.

Hope that helps, Zach! And good luck!

Helpful links

Get involved with a workshop on social media for procurement – (https://www.procurious.com/blog/procurious-news/procurious-announces-webringthedonuts-campaign)

Kick off your learning on Procurious with our ‘Introduction to Procurement’ videoshttps://www.procurious.com/class/all

What can you do in 2015 to make the most of social mediahttps://www.procurious.com/blog/procurement-news/procurement-in-2015-a-new-years-revolution

Getting the most out of networking – https://www.procurious.com/blog/procurious-news/step-up-your-networking-game-the-basics

Know what other skills you might need in procurementhttps://www.procurious.com/blog/life-style/job-survival-skills-get-a-grip-on-the-numbers

How falling oil prices are impacting Procurement and Supply Chain

How falling oil prices are impacting Procurement and Supply Chain

According to the BBC, the price of Brent crude oil has fallen to a new six-year low this morning. The price of a barrel dropped by a further 3% to $48.54, its lowest level since April 2009. Goldman Sachs have also stated that they believe the price of a barrel will stay around $40 for the first half of this year.

How falling oil prices are impacting Procurement and Supply Chain

Why is this happening?

Well, in short, the global demand for oil is falling due to weakened economies, increasing efficiency and a move away from oil to other fuels. There is also a surplus in production due to America’s fracking programme and high output in Libya and Iraq despite instability.

Personal vs. Professional

So while it may be a cause for personal celebration when we fuel up ours cars, what does it mean for us all professionally?

Supply Chain and Logistics organisations should see the benefit of falling prices at the pump, while procurement in other areas should see falling commodity prices and lower costs.

However, for those people purchasing travel for their organisation it’s not such a celebration. It is widely expected that travel, particularly air travel, will not benefit from lower prices, as airlines tend to purchase fuel in advance to lessen impact from price shocks.

The picture is also not so rosy for major oil companies. Most are now likely to have to rethink investment decisions and step up cost-cutting programmes. Onus for this cost cutting is likely to fall on procurement and suppliers.

Moreover, we need to consider our suppliers’ position if the focus is on cost cutting. Deflation in industries such as food and beverage and FMCG, is already causing issues for supply chains. An early example of this is in the dairy industry, with First Milk delaying payments to suppliers by 2 weeks due to falling prices and cashflow issues (http://www.bbc.co.uk/news/uk-30771288).

What can we do?  

1. Focus on relationships and partnerships, not just cost cutting. Supplier Relationship Management can play a big part here (https://www.procurious.com/blog/in-the-press/three-key-insights-on-the-importance-of-srm).

2. Work out where you can add value. Deloitte offered a broad range of thoughts in their 2014 CPO Survey (https://www.procurious.com/blog/in-the-press/procurement-time-to-move-through-the-gears).

3. Be more open to innovation from suppliers. It’s not something that procurement are traditionally good at, but there is value to be found by working more closely with suppliers (https://www.procurious.com/blog/trending/2015-will-be-about-innovations-in-the-logistics-world).

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

How sloppy security exposed Apple’s supply chain secrets

  • Incredibly sloppy security at one of Apple’s key suppliers exposed some of Cupertino’s most closely guarded secrets to anybody who could conduct a simple Google search.
  • For months, one of Quanta Computer‘s internal databases could be accessed using usernames and a default password published in a PowerPoint presentation easily found on the Web.
  • The path to Quanta’s database started last September when, on the eve of the big Apple Watch launch event, an anonymous Reddit user posted drawings and details of the super-secret device.
  • The document dates from January 15, 2013. It describes a Quanta database for managing the environmental aspects of products and components. The PowerPoint presentation appears to have been made to show Quanta’s customers how to log in and use the system. Incredibly, it includes a link to the database and details of the usernames and default password for at least two customers, including Foxconn, Apple’s main manufacturing partner in China.

Read more at Cult of Mac

Self-driving trucks to revolutionize logistics

  • DHL Trend Research has launched their latest trend report, titled “Self-Driving Vehicles in Logistics”, which takes readers on a journey of discovery, highlighting the key elements and incredible potential of autonomous technologies.
  • DHL plans to “maintain pole position in the world of self-driving vehicles,” wrote Matthias Heutger and Markus Kueckelhaus, the authors of the study. “The question is no longer ‘if’ but rather ‘when’ autonomous vehicles will drive onto our streets and highways.”
  • A boom in electronic commerce is making it harder for delivery companies from DHL toUnited Parcel Service Inc. (UPS) to satisfy consumers who expect first-attempt delivery even though they’re not home during daytime hours.

Read more at Supply Chain 24/7

Jaguar to create 1,300 manufacturing jobs with new sports car

  • Lode Lane plant in Solihull will receive largest investment in its 70-year history as manufacturer unveils plans for ‘practical five-seat vehicle’.
  • The new sports car, which will go on sale next year, will follow this year’s launch of the Jaguar XE sports saloon, also produced at Lode Lane, which has seen several thousand new jobs created in recent years.
  • The XE will create 1,700 in-house jobs at Solihull, 700 more at parts supplier DHL and well over 2,000 in the supply chain. Jaguar Land Rover chief executive Ralf Speth said: “Today’s announcements once again demonstrate our commitment to the UK and the advancement of a hi-tech, high skilled, manufacturing-led economy.
  • The Lode Lane facility incorporates Europe’s largest aluminium body shop and final assembly hall, collectively the size of 22 football pitches.

Read more at Birmingham Post

Industry shake-up as policy uncertainty forces a quarter of businesses out of the wind

  • FTI Intelligence has published its latest renewable energy publication: Global Wind Supply Chain Update 2015. The Update is part of a series of data-driven publications evaluating competitive markets, policy, finance, technology and business models across the energy spectrum.
  • The report examines the supply chain situation for 12 key components (350+ suppliers) and three key materials (150+ suppliers), which account for more than 95 per cent of a wind turbine’s total cost.
  • One of the key findings tells of the delicate balance in the offshore wind supply chain at present. Challenges remain in the medium-term – one third of the cost reduction of offshore wind energy partially relies on supply chain industrialization for disruptive technologies and key elements including the offshore wind balance of plant. This ambitious target is, however, unlikely to be achieved without long-term market stability.

For more info (and to access the publication) head here

Are we falling out of love with the PQQ?

Are you someone who can’t live without two stages?  Do you quake in you boots at the thought of having too many tenders to score?  Are you like my colleagues in works; do you love a good old PQQ?

The benefits of the PQQ

Well thanks to the EU procurement directive, Scottish Construction Review and improving public procurement practice, the Pre Qualification Questionnaire is in danger of falling into misuse in Scotland.  But will the PQQ really end up like a great pair of 1970s flared jeans?  Something which we put to the back of the wardrobe only to bring out again when they come right back into fashion.

Before you take your PQQ to the charity shop of procurement history, here are a few reasons why it might be just the procurement tool you’ve been looking for.

Don’t bin the PQQ just yet

So you’ve done your supply market analysis and you may even have published a future contract opportunity or a prior information notice.  All the intelligence you’ve gathered tells you that the tenders you should receive will be many and plentiful.

While you may be tempted to jump straight into the Invitation to Tender, a well thought out PQQ can benefit both your Client service and potential Suppliers:

  1. Reduces the amount of evaluation work required by the Client
  2. Sorts the ‘Great’ suppliers from the ‘Good’
  3. Allows Small and Medium Enterprises (SMEs) to apply and only spend valuable time and resources on a full-blown tender if they qualify and are really in with a chance of winning
  4. Speeds up the tendering process
  5. Allows a logical and defendable evaluation to be made.

Using a PQQ is the obvious answer to make sure the more detailed Price : Quality evaluation work at the second stage doesn’t take your Panel all year to complete.  Believe me, the Panel will thank you for this.

Sometimes a just asking a straightforward pass/fail qualification question doesn’t give you the detail you need to differentiate the great suppliers from the good.  A PQQ with some scored questions could be just the tool to use when you need a more sophisticated evaluation process.

SMEs don’t have the resources of larger companies.  For them preparing a tender will take resources away from their ‘day to day’ work, costing them both time and money.

It is much fairer to only ask them to do this if they genuinely have an opportunity to win the tender, and a PQQ will enable this.  Not only that, done correctly, the PQQ can demonstrate to the SME exactly what the Client is expecting (and so may deter SMEs who just can’t deliver).

While the PQQ is an extra-step on the ladder and may appear to increase the time taken between tender and award, in fact it can significantly speed things up.  By using the PQQ to decide who goes through to the tendering stage, it speeds up the Award process.  Not only that, but it spreads out the time and commitment from the Evaluation Panel, allowing them to schedule their contribution over a period of weeks and avoid the accusation that this procurement thing is just a load of bureaucratic time-consuming red tape.

Finally the PQQ can be used to defend decisions taken at an early stage.  Suppliers are told at the start of the process that either they can or can’t tender.  So any challenges to the decision not to be allowed to tender are made before the contract award.  This should mean that, once the contract is awarded, there’s no issue with the qualification part of decision.

Although the mechanistic days of using a PQQ just because we’ve always done are over, let’s not put our procurement “flares” to the charity shop just yet.  By thinking about how to effectively use a two-stage process we can get the best outcome for our services and our suppliers.

Best of all we won’t have to contemplate life without our beloved PQQ.

Procurement in 2015 – A New Year’s Revolution?

A very Happy New Year from everyone at Procurious HQ.

We hope you, like us, enjoyed the break, over-indulged on Christmas chocolate and good cheer and have come back to work refreshed and ready to make 2015 the year for procurement.

New Year resolutions for 2015

We had some great content published over the holiday season, including some great ideas for what you as a procurement professional could be thinking about for the coming year. In case you missed it, here’s a quick recap:

Make sure that a Work-Life balance isn’t just something that happens to other people – https://www.procurious.com/blog/life-style/how-to-achieve-the-perfect-worklife-balance-for-a-productive-2015

Consider what other skills you might need as a procurement professional – https://www.procurious.com/blog/life-style/job-survival-skills-get-a-grip-on-the-numbers

Find out what it takes to be a great procurement boss – https://www.procurious.com/blog/procurement-news/what-makes-a-great-procurement-boss

Get your category approach right and reap the benefits – https://www.procurious.com/blog/procurement-news/category-approach-simply-tactical-excellence

Also, here are a few recommendations on how you can get the most out of Procurious this year:

  1. Complete your profile – if you haven’t already, add a picture, location and category so you can connect with the right people and they can find you too!
  2. Find an event near you by looking at our Events calendar – this is a great way to connect with fellow Procurians in person!
  3. Start or contribute to a discussion – if you have a burning question or want to share your thoughts, this is the way to do it.
  4. Check out our Groups – find a group that is specifically for your category, location or job and connect. Can’t find one for you? Why not create one and invite people to join.
  5. Top up your skills – check out the Learning hub for videos and podcasts. If you think we’re missing something, let us know.

We think this year is going to be a great one for procurement. Play your part and get involved!

China starts military procurement website to boost transparency

  • China started an official website to make some of its military procurement public, revamping a system that officials say encouraged opacity and corruption.
  • The website, which went online yesterday, contains a list of more than 350 items from satellite surveillance equipment to domestic-made information systems that will be procured by the military. The site is manged by the General Armament Department of the People’s Liberation Army.
  • “It’s a fresh start to make the military procurement transparent,” Yue Gang, a retired PLA colonel, said in an interview. “The lack of efficiency in military spending worries the top leaders as a major source of corruption.”
  • The overhaul of military procurement procedures aims to get qualified, private businesses involved in weapons research and production in a bid to improve competitiveness and efficiency, the official People’s Daily reported, citing Feng Danyu, director of the planning department of the PLA’s General Armament Department.

Read more at Bloomberg

Tesco to reveal new supplier payment system as fears of second-half loss grows

  • In the wake of a terrible 2014 for the retail giant, Tesco is preparing itself to overhaul the way it organises its supply chain.
  • According to the Sunday Times, which quotes senior sources, Tesco chief executive Dave Lewis plans to unpick the complex system of rebates and penalties used to extract money from suppliers, replacing it with a far less complicated structure built around sales volumes.
  • The Sunday Times’s insider also claimed the shake up would make Tesco more popular with suppliers, leaving rivals with the choice of following suit or sticking with the status quo.
  • Tesco has had a torrid time recently and Christmas sales figures are unlikely to offer much respite. A significant drop in like-for-like sales – perhaps as much as four per cent – is expected, which could be enough to push the company to a second-half loss on its British operations.

Read more at CityAM

European supply chain tackles counterfeits, says Converge

  • The aerospace and defence supply chain has a new certification for independent suppliers and distributors, which will dramatically change the industry for suppliers to high reliability markets.
  • SAE AS6081 Counterfeit Avoidance Standard has been in the pipeline since 2007, when the US government began to investigate counterfeit electronic components entering the Department of Defence (DOD) supply chain and the G-19 committee of the SAE was formed.
  • The committee developed a document that would standardise requirements, practices, and methods related to counterfeit parts risk mitigation. Whilst the AS6081 standard originated in America, the issues are global and the certification due to be launched in the coming months is designed to have an international scope.
  • “This will change the industry dramatically; all independent distributors who wish to supply the US DOD must comply and we expect that the global industry will follow. AS6081 is a very tough certification to achieve and few of the thousands of independent distributors in the market will be able to comply with it,” said Eric Checkoway, general manager and vice-president of Converge, the independent distributor owned by Arrow Electronics.

Read more at Electronics Weekly

Sainsbury’s and GLA team up to fight supply chain exploitation

  • Retailer Sainsbury’s is working with the GangmastersLicensingAuthority to address labour exploitation and modern slavery in the supply chain.
  • The GLA is providing tailored training for suppliers to the supermarket to help them identify hidden exploitative practices at farms, pack houses, processing plants and factories.
  • Paul Broadbent, chief executive of the GLA, said: “There is a real commitment and desire on both sides to identify any practice that subjects workers to exploitation. “By raising awareness through training, Sainsbury’s is showing a determination to identify any issues of concern. I applaud them for this and will continue to work alongside them to tackle it.”
  • The pilot scheme builds upon the protocol between retailers and suppliers launched by the UK government in October 2013.

Read more at Supply Management

Logistics Academy launches in Dubai

  • Logistics Executive Group has reached a major milestone with its global Logistics Academy recently completing its first course in the Middle East.
  • Organised as a result of a partnership between Logistics Executive Group and Iconis Learning & Development, a leading worldwide training organisation, the workshop was delivered in Dubai by Iconis directors David Rowlands and Jon Spencer, who possess over 50 years of learning and development experience between them.
  • The course included two half day interactive sessions focused on developing emotionally intelligent leadership and employee engagement skills.

Read more at Arabian Supply Chain

Category approach, simply tactical excellence…

There is no single accepted global name or branding for what we are discussing here. It is category management, the sourcing process, the purchasing wheel, supply management or sourcing material group management.

The philosophies of different companies and their purchasing departments have led to different definitions. To avoid confusion, I will use the term category approach to describe an end-to-end sourcing process. As I will highlight in this article intent, the process has a wider approach, taking into account project, workload, performance and compliance aspects.

Bees working together

Globalization intensifies market competition. Political regulations apply more than ever. Supply chains and supply markets are in movement and need to be more flexible and scalable than ever to quickly adapt to demands and product lifecycles. CFO´s and shareholders require sustainable contributions from procurement departments and accuracy in forecasts regarding cost and volumes. Whether decentralized, centralized or center-led, many purchasing organizations began some time ago to evolve as they identified the need to invest resources in managing this complexity, in proportion to spend and material groups with more strategic implications.

With the specific dedication of resources to support supply decisions, buyers were shifting from a traditional approach (huge effort put into negotiation but less on preparation and implementation) to an effective approach (intensive preparation and implementation with much less negotiation, supported by strategies and tools that create the right competitive atmosphere). This way of working with dedicated resources began to foster the category approach.

At the same time technologies were accelerating: at the beginning of the 90´s with the explosion of ERP´s and then since the mid-late 90´s the large battery of requests for quotation tools (RFQ or RFx), vendor portals, contract databases, evaluation tools, e-procurement tools (differentiating buying channels) and supplier relationship managers has risen. By ensuring robust and specific process steps, the tools created savings however, in many cases they were not aligned with a comprehensive end-to-end category approach that would meet overall expectations.

We need to assess the true potential of the category approach, ensuring that procurement departments prove their value contribution towards their organization and P&L, and meet these expectations.

Diagnosing expectations 

Expectations with regard to procurement are of both internal and external nature. Internally, stakeholders have diverse expectations depending on their relationship with procurement. Research & development, quality, marketing or IT know that at least for the purposes of segregating duties, they have to work with procurement. And they expect and deserve an honest delivery without hidden agendas. Finance wants procurement to deliver on savings expectations and the audit and compliance teams expect that governance and sourcing processes are effective (do the right things) and efficient (do things right). Supply markets increase their expectations regarding procurement when these relationships, and the businesses themselves, mature.

By assessing the company´s position regarding the key process category approach excellence, executives can determine the type of expectation-fulfillment that needs to be improved by exploring questions like:

Do you have a description of the category approach path that shows stakeholders the End-to-End Sourcing process? 

Marketing uses new product introduction processes with milestones in order to bring all people concerned on board and provide them with all relevant information for keeping timelines and making a launch a success. Only if awareness of the complete sourcing process is embedded in the organization, can you hold a meaningful dialogue with senior stakeholders.

Are you persuasively closing the loop between expectations and deliveries? 

Say what you do and do what you say. Procurement professionals cannot work isolated from the other departments. Staff and skills requirements have to be adapted and professionalism in all procurement layers has to be widely known and sustained by adequate system support.

Is the company making the best use of the procurement team? 

A consumer printer producer faces product lifecycles of less than 15 months and organizes a team to increase customer experience for the following launches. Only a carefully designed dynamic resource allocation plan can help team-leads to identify which resources, at which steps, and for how long, can be released without jeopardizing the previously pledged deliverables.

How are you making sure that the expected process steps are completed? 

In times of high workloads and time pressure, it is easy for individuals involved in procurement to make shortcuts to the sourcing process (damaging credibility that was acquired at great expense). In some cases, tool usage (RFx or contract management) is low or nonexistent. In other cases, rigid sourcing process methodology is driven forward for categories that, due to their internal maturity or low complexity, just do not justify the workload your buyer is investing.

To what extent can you anticipate deviations in the delivery of savings due to sourcing process constraints? 

Credibility is established by meeting the company’s expectations in the appropriate way and selling them adequately. It does not help the company to ignore disruptions and delays. Only appropriate advanced notice and the setting up of a remediation plan can prevent disappointment.

Shaping the Category approach excellence excellence 

To maximize the potential of procurement departments, only a few companies that I know have successfully used an approach to devise the foundations of procurement category management. This simple but effective framework meets expectations, captures value contributions better and facilitates a faster decision-making process.

Following this approach, the company first predefines all categories and specifies project initiatives they will cover in the short and medium term. Next they link accurate process steps to each sub-category and initiative. Then, supported by a practical tool, the company can track project progress, monetary volumes and savings, compliance to the process, performance and resource workload.

Step 1: Capture the total picture 

I do not mean to capture the total spend. The total spend, depending on the maturity of your PO compliance, simply cannot be correctly ascertained. The monitored amounts on the budget are real, but a purely financial view cannot tell you the necessary details the market would need to provide these goods or services.

What we propose is a practical application recording the expenses of all categories that are actively influenced by procurement. Spend that is actively managed is spend that you have been negotiating or you are going to negotiate for the first time. It is the spend that procurement could clearly footprint (by using RFx, bidding, e-auction or competitive negotiation). You can also add all specific initiatives you have in your pipeline. A simple tool will support follow up and will bring reporting to a higher financial level.

Step 2: Predefinition of process steps for each sub-category 

A source to pay (S2P) or source to contract process (S2C) has sub-process steps and related tasks that for each type of spend and supply risk should vary, depending on supplier base, availability, company or supply market strengths.

You can define for each sub-category which process steps you will apply. Then you can make them visible and discuss them with your stakeholders.

In many companies, excellent sourcing toolkits and buyer guides have been developed. But if these are not linked specifically to each of the process steps upfront then you are not capitalizing on their full value.

When performed every year, this exercise will give you a more differentiated communication approach to each of the stakeholders, including those in finance and audit. It will also allow you to gain an overview on resource planning. You will be better prepared for dialogues around top-down targets and bottom-up expectations.

Step 3: Follow up and tracking 

An essential part of a successful category approach excellence, that moves money “from the paper to the pocket”, is the team, and their performance depends on the category project. Placing trust in people does not exclude monitoring and systematic follow up and the task of category management is mandatory for team leads. Too often the procurement department is managed in a reactive manner based on the escalations of stakeholders, rather than being proactively managed.

In order to enable managers to evaluate outcomes and coach their procurement staff, tool support is needed! Consistent inputs and functional information flow are required. One way to reduce instinctive resistance is to provide a tool that is user-friendly and that provides benefits such as reducing the rising preoccupation with compliance within procurement.

Additional benefits would include reporting capabilities for the status for all ongoing initiatives and team dimensioning capabilities.

Conclusion 

Sourcing departments need more than ever to meet expectations regarding their organization and prove their value contribution to the profit and loss statement (P&L). The category approach as TACTICAL excellence is the basic prerequisite for the successful improvement of a company’s existing sourcing process.

By applying a rigorous process and project approach with the support of a tool, sourcing professionals can gain credibility and improve their value contribution.

Very often you will need external process support to redesign existing ways of working. Additional benefits are consolidation of all categories and initiatives in one view, proper resource allocation, facilitating managers with follow up and performance measurement and supporting compliance requirements.

Category approach, simply a TACTICAL excellence, has still a real potential!

What makes a great Procurement boss?

As a bonus for the festive season, we have wrapped one final discussion from our forum. The discussion topic nicely links with other Procurious content you can catch up on and one of our key events next year.

What makes a good boss?

The Good or the Bad? What makes a great Procurement boss?

What attributes a leader requires can provoke much discussion and provide a wide variety of opinions. As Procurement seeks recognition both for the value that it provides to organisations and in gaining that C-level seat, our leaders might need to be something different.

The top voted answer in the discussion was that the leader needed to have ‘the ability to innovate in the process and supplier relationship management dimensions’. With process and supplier management both providing big news stories this week, this would seem to be a critical attribute.

The answer also touched on drawing value from the market for the benefit of the company, something that the recent IBM CPO Study on creating value research in more detail.

Other answers focused on listening, supporting and encouraging employees and leading by example. The leader needed to have followers, while at the same time having strong influence in order to ensure strategic alignment and shared objectives.

Other attributes that were highlighted included:

  • Understanding procurement and the value it brings
  • Earning and being respected as a leader
  • Communication, openness and honesty
  • The ability to think innovatively and challenge the status quo
  • Being inspirational and visionary
  • Creating energy in a team to reach goals
  • Being structured and aware of strategy

Of course there are plenty other attributes that could be attached to a procurement leader, but these are a good start. If you are looking for more information, check out some of the following:

  • Events Hub – find events near you, get more information and get connected in person to other procurement professionals
  • Learning Hub – find videos and content on leadership and key attributes

Procurement – New Year, New Image

It’s very nearly time to wrap up for Christmas at Procurious HQ, but not before we’ve had our say on some of the key stories over the past week.

jjbsportsIf you haven’t thought of a procurement-related New Year’s resolution for 2015, why not join Procurious in aiming to change, improve and lift up the brand and image of procurement.

The function’s image has taken a bit of a battering in recent weeks, with a glut of stories on the treatment of suppliers, ethically questionable procurement practices and convictions for fraud and bribery in both supplier relationships (JJB Sports, UK) and tenders (US Defence Contracts).

Procurement has both the ability and responsibility to ensure that these practices are stamped out. Procurement professionals hold a unique position in the organisation of being able to influence spend, but also control the ethics and governance of the purchasing process.

So how do we do this? First, check out recent articles including detecting fraud in your organisation and the importance of Supplier Relationship Management. Then invite your network to get involved with Procurious and we can collectively get working on our aims in 2015.

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

Fraud – https://www.procurious.com/blog/in-the-press/how-to-detect-fraud-in-your-organisation

Oh, and just to lighten the mood, keep an eye out this week for an article on the best and slickest supply chain in the world. Who else but Saint Nick himself…

GST reduces complexity, improves supply chain

  • With GST Bill being tabled in the Parliament, companies operating in supply chain business stand to benefit, says Vineet Agarwal, MD of Transport Corporation of India .
  • But GST will have no direct impact on a company like his, which is a services company, since it is essentially a consumption tax and will have an impact on manufacturing.
  • However, the introduction of GST will lead to some reduction in expenditure, he adds. He expects the supply chain business to grow at around 20 per cent in FY15. He also has a positive outlook for FY16.
  • Going ahead, Agarwal sees a revival in the auto sector. Transport Corporation of India derives nearly 70 per cent business from it. When compared to FY13 and FY14 he sees significant improvement in business.

Read more and watch a video at Money Control

Procter & Gamble reports big moves in 16th Annual Sustainability Report

  • The Procter & Gamble Co. (P&G) is serious about environmental stewardship, as its 16th annual sustainability report reveals.
  • The multinational consumer goods company met several environmental goals ahead of schedule: P&G met its waste reduction goal for 2020 six years early and its pulp certification goal a year early.
  • P&G only disposed of 0.40 per cent of input materials as manufacturing waste to landfill across its facilities. That means 99.6 per cent of all input materials are either recycled, reused or used for energy conversion. The 2020 goal called for less than 0.50 per cent.
  • In April, the company announced steps it would take beyond Roundtable on Sustainable Palm Oil (RSPO)certification to ensure it does not contribute to deforestation. The steps include developing a traceable supply chain, no development of  high conservation value (HCV) areas and high carbon stock (HCS) forests, no development of peat lands, no burning to clear land for new development or replanting and complying with P&G’s Sustainability Guidelines for External Business Partners.

Read more at Triple Pundit

St Helens surgical gloves supplier in position to supply the whole NHS

  • A Merseyside supplier of surgical gloves has won a place on two NHS procurement frameworks – meaning it can now supply its products to NHS trusts across the UK.
  • St Helens-based Leanvation was established one year ago by former healthcare executives Dr Jonathan Day and Tony Downes, with backing from the North West Fund for Venture Capital. They have developed a range of surgical gloves that aims to reduce the risk of allergies and hand fatigue.
  • Under EU rules, NHS Trusts are limited in the value of products they can purchase from any one supplier without going through an official tender procedure. Securing a place on the NHS Shared Business Service Framework and the Health Trust Europe Framework allows Leanvation to overcome this barrier.
  • The company will be launching four new products in early 2015 and is about to start work on a new range of surgical gloves designed to further improve infection prevention, thanks to its success in winning a five-figure research grant. Dr Day, Leanvation’s managing director, said: ”This is a major step forward for Leanvation, effectively giving us a licence to supply the NHS in volume and compete alongside the traditional multinational surgical glove brands.

Read more at Liverpool Echo

Canadian defence procurement – everything old again is new again

  • The Conservative government last week released its Value Proposition Guide that is supposed to provide direction for firms who will be preparing bids for future defence procurements. Those procurements will be governed by the government’s new Defence Procurement Strategy.
  • “The Value Proposition Guide is a new tool for fostering investment in the Canadian defence industry,” the news release from Industry Canada noted. “The guide will ensure that the Government of Canada’s Defence Procurement Strategy will result in the creation of high-skilled jobs and economic growth across the Canadian economy.”
  • It seems that everything old again is new again. I was writing articles in the mid to late 1980s about the efforts of the Mulroney government to shore up the defence industrial base. Such benefits linked to defence contracts are called offsets in the U.S. and other nations. The Canadian offset program continued throughout the Kim Campbell and Chretien governments and into the Paul Martin government.
  • The linking of work for Canadian firms to the awarding of contracts to foreign companies was, however, eased under the Harper government. After much concern was raised by the domestic aerospace and defence industry that they were getting little work of value even as the Harper government spent billions of tax dollars buying new military equipment, the Conservatives came up with its “value propositions” program.

Read more on Ottawa Citizen