On 30 April Procurious is gathering the Procurement world’s most influential minds for a discussion on the future of the function. The Big Ideas Summit will take place physically in London, but will be made available to attend digitally across the world through Procurious.com.
We’ve identified risk, technology and talent as three areas that will play a critical importance in the future development of function. In order to address these important areas and provide some background into the discussions and debates that will take place on the day of the summit, we have dedicated a series of blog posts on these topics. Keep your eyes peeled for our overview of technology and risk, but…
Today we are talking talent
In this piece we’ll be highlighting some of the high level trends that are impacting the way procurement teams manage talent. Be sure to stay tuned to Procurious as we’ll be deep diving into each of these topics over the coming weeks.
Hiring is up!
According to LinkedIn (which is quickly becoming the world’s largest recruitment organisation) firms will be looking to hiring more people in 2015, and will have a higher budget to do so. A survey run by the social network suggested that 63 per cent of recruiters will have a higher hiring volume in 2015 than in 2014, and that 46 per cent of recruiters will have a higher budget over the coming year (up from 28 per cent in 2013).
The rise of Intrapreneurship
Intrapreneurship is a term popularised by Howard Edward Haller in in the late 70’s. So, while the concept is not new, it’s certainly seen a revival in recent years.
The practice of intrapreneurship involves bringing an entrepreneur-like mind set and business practices to a larger, more established organisation. The rise in intrapreneurship has been attributed to increased competition in traditional markets from smaller more agile organisations. Larger organisations are realising that in order to remain competitive they need to innovate… Enter the Intrapreneurs.
The war for talent
Would it surprise you to learn that procurement is one of the fastest-growing professions in the world? Our increasing demand for talented professionals is outstripping supply. Procurement also competes for talent. We compete with other functions and other business. If you don’t have a sound talent acquisition and retention strategy you’ll be left behind.
As a consequence we have seen salary inflation and a lot of bad hires. It is a candidate-centric market.
One area that procurement teams may be missing a beat on is the art of attracting passive talent. LinkedIn suggests that while 75 per cent of potential candidates are passive in their job search (meaning that you have to go and find them) only 61 per cent of organisations have a strategy for attracting passive candidates.
Discussion at the Big Ideas Summit will also focus around the critical and growing role that social media is playing in attracting and retaining top talent.
Social media can be utilised by firms to not only list job postings, but also to represent a business’s mission and value (which can be vital to attracting talent) and to evaluate the cultural fit of potential candidates.
The labour market is tightening, which means the need to engage, retain, and up skill your existing resources is growing. The participatory and collaborative nature of social media is inherently suited to peer-to-peer learning which is both highly effective (learn real life lessons from subject matter experts), accessible (it can be accessed across multiple devices at a time convenient to the learner) and extremely cost effective (Procurious, for example, is currently offering the entire suite of online learning modules free to members for a limited time).
Social media also offers candidates a unique opportunity to elevate their personal brand as well as the profession. As a platform it is the perfect tool to share knowledge, ask questions, engage in discussion and spread influence.
As we get closer to Big Ideas Summit 2015 we’ll explain how you can use social media to both attract new talent, and up your own networking game.
The world’s largest cruise company has announced that Julia M. Brown will become the company’s CPO. The role of CPO is a newly created one for Carnival and it’s hoped that Brown will be able to strengthen strategic partnerships with the company’s network of suppliers around the world.
Brown will be tasked with improving efficiencies and driving strategic sourcing across the company’s nine brands, which are spread across the globe. It’s thought that combining the purchasing power of these brands will lead to significant costs and efficiency savings.
On the announcement of the new CPO Arnold Donald, president & CEO for Carnival Corporation & plc said: “We are excited to have Julia join us as part of our global management team and take on this new role that will be critical in helping us further leverage our scale, accelerating our drive to double-digit returns on invested capital.”
Brown comes into the position with a solid background in procurement having previously held the role of CPO at Mondelez and Kraft, as well as strategic roles with Diageo, Gillette and Clorox.
Speaking on the need for the new role of CPO Carnival Corporation’s Chief Operations Officer Alan Buckelew said: “As we have become increasingly global, the role of coordinating our procurement and supply chains has become more and more complex. At the same time, our global sourcing function creates opportunities for us to improve guest experiences onboard our ships and collaborate across our brands to operate more efficiently. Julia brings a depth of leadership and experience that will help us capitalise on those opportunities, as we build on the success our teams have already achieved.”
Last Thursday, UK Chancellor George Osborne outlined his fifth and final budget for the current parliament. Many analysts viewed this budget as pivotal as it helps to highlight the state of the economy in the run up to the General Election in May.
For many others, however, the pre-election budget amounts to no more than political positioning and posturing – a chance to take a free swing at opposition policy. The policies are subject to the outcome of the election and many are never implemented.
However, taking the Budget at face value and assuming that some of these policies will be implemented, what does it mean for procurement and supply chains? Procurious aims to talk you through some of the detail here.
The Budget – Key Points
First we need to summarise a selection of the key announcements. For a more detailed run-down, click here.
UK economy grew 2.6 per cent in 2014, faster than any other advanced economy
Record employment in the UK, with jobless rate to fall to 5.3 per cent this year
Trade deficit figures “the best for 15 years”
Inflation projected to fall to 0.2 per cent in 2015
Borrowing set to fall from £97.5bn to £12.8bn in 2017-8
Beer and cider duty cut; spirits and petrol duty both frozen
The tax-free personal allowance to rise to £11,000 in 2017-8
From a business point of view, the news somewhat mixed.
Tax on “diverted profits” to come into effect next month
Annual bank levy to rise to 0.21 per cent, raising an extra £900m
Supplementary charge on North Sea oil producers to be cut from 30 per cent to 20 per cent while petroleum revenue tax to fall from 50 per cent to 35 per cent.
New tax allowance to encourage investment in North Sea
Review of business rates but no details
Behind the Figures
Experts were largely positive in response. James Sproule, Chief Economist at the Institute of Directors, stated that although the economic recovery was taking longer than anticipated, “the immediate news was encouraging with employment rising to record levels”.
Also, despite concerns about the UK’s debt position, Sproule said, “the degree to which government and businesses are beginning to pay down their debt is an encouraging trend”.
However, it would be naïve to assume that it was all good news for the UK. Despite a more positive outlook and plans to end the public spending ‘squeeze’ a year earlier than planned, an additional £30bn in savings still needs to be found over the course of the next parliament. This means austerity measures and spending cuts will have to continue.
From a business point of view, this mean less business in the private sector, tighter budgets and the requirement to look further afield for new opportunities.
George Osborne pointed towards this when highlighting China as a major export market in the coming years. With an export target of £1 trillion by 2020, an increase in funding to the UKTI is a good start. But Allie Renison, Head of EU and Trade Policy at IoD, argues that a focus on one economy is not necessarily a good idea.
“Focusing the extra funds on China raises questions about the wisdom of prioritising one geographical market over another. The Chinese economy is changing, and consumer preferences are shifting with it. We have not yet seen the expected boom in demand for services materialise, at least not in the financial and associated business services sector.”
Impact on Procurement and Supply Chains
What does this all mean for procurement and supply chain in the long run?
Mentions of procurement were mostly limited to the public sector and increasing efficiency requirements. Without any details provided, there was talk of cuts to NHS procurement, something that is currently under examination by Lord Carter, the chair of the NHS procurement and efficiency board.
The long-term future may also hold more autonomy on spend in public sector procurement. Councils in Greater Manchester are being given more administrative power over income, with many seeing this as a test case for more regional powers.
The freeze on fuel duty will provide relief for logistics organisations too, as well as removing cost from many supply chains. This should provide more opportunity for supply chains to focus on increasing efficiency and diversity, assessing appropriate routes for both import and export, as well as where further improvements can be made.
The government has been challenged to help supply chains more when it comes to identification of these opportunities. Allie Renison argues “much more emphasis is needed on specific sector supply chains, to help identify where gaps exist, both in terms of research and practical support.”
In the coming weeks, we will return to this debate as policy announcements are made by the leading political parties. Procurious will look to assess these policies, their impact on procurement and what the overall impact of the General Election will be.
In the meantime, here are some of the other major procurement stories making the news this week.
Supply chain changes could cut food waste
Changes to the supply chain could save millions in food waste by increasing the life of products, according to a study. WRAP estimated an increase of one day on product life across a range of foods could prevent around 250,000 tonnes of food waste each year.
The study, Reducing food waste by extending product life, examines how ‘use-by’ and ‘best before’ dates are set by food manufacturers, brands and retailers, for foods that typically have a high level of waste. They included sliced ham, potatoes, apples, minced beef, juice, chilled pizza/chilled ready meals, bread, chicken breasts, bagged salad and milk.
It estimated the potential overall tonnage and financial savings by scaling-up data from these products to all food groceries.
It also urged manufacturers and retailers to challenge the safety quality ‘buffers’ to find opportunities to extend product life. It calls for a standardised approach to ‘open life’ guidance – the time food is deemed safe or retains its best quality once opened – and that it should be used only for food safety rather than quality.
Oil producers outside OPEC must cooperate to boost falling crude prices as the cartel refuses to take responsibility alone, the Saudi oil minister has said. “We refuse to take responsibility alone because (OPEC) produces 30 per cent of market output and 70 per cent comes from outside,” Ali al-Naimi said in remarks carried Monday by the Saudi Press Agency (SPA).
Crude prices slumped by about 60 per cent between June and February, weighed down by a glut of global supplies and concerns about stalling demand. The slide was exacerbated in November when Organization of the Petroleum Exporting Countries (OPEC) refused to cut production to rescue falling prices, saying it wanted to maintain its market share.
The 12-member group, led by top producer Saudi Arabia, pumps around a third of the world’s oil but other major producers, such as Russia, are not tied by its decisions. Asked whether OPEC would be willing to work with non-members, Naimi pointed to the crash of 1998 when the cartel cooperated with other producers to cut output and support oil prices.
With Intel having recently lowered its revenue forecast for the first quarter, sources from the upstream supply chain have pointed out that channel demand remains weak and order visibility until the third quarter is still unclear. Despite the fact that Microsoft is planning to release Windows 10 in August and offer free upgrades, the sources are concerned that the move may not boost PC sales much in the third quarter.
Demand for PCs has been weak in the first quarter as related players have not been able to come up with attractive new features for their products, causing a slow digestion of channel inventory and forcing Intel to reduce its financial forecasts.
Although PC players are expected to reduce their inventories to safe levels by the second quarter, weak demand from the channel, especially in Europe is expected to continue impacting PC sales in the quarter
UK government publishes details of new public sector procurement apprenticeship
The UK government has published details of a new public sector procurement apprenticeship. The two-year apprenticeship standard covers “all three aspects of the commercial life cycle: pre-procurement, sourcing and contract management”, with an assessment at the end and a requirement to achieve the CIPS Level 4 Diploma in Procurement and Supply.
The apprenticeship covers early market engagement, sourcing, contract agreements, supplier management and category management. A description of the role of “public sector commercial professional” said: “In the public sector a commercial professional’s role is to support the transformation of the way that the best quality public services are delivered, while securing value for taxpayers’ money. Experience will be gained working on high-profile, high-value, high-risk projects that affect millions of people and are worth billions of pounds each year.”
The government said the standard was not yet ready to use but will replace current apprenticeship frameworks by 2017/18.Read more at Supply Management
Procurious is in Cardiff for Procurement Week 2015. We sat in on the 4th FAPPE (Faster Adoption of Public Procurement in Europe) Meeting where the group discussed pertinent issues that need addressing when deciding on a roadmap for smarter procurement.
We’ve taken these concerns and have chosen to present them to you in the form of an infographic.
FAPPE is the brainchild of Rui Patricio – the Managing Director (Procurement & Innovation Management Consulting) of Digitalflow. Digitalflow is a Portuguese boutique consulting firm that offers a full range of services to support the implementation of business-to-government processes making use of electronic platforms.
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?
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.
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.
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.”
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.”
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.”
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.
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.
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?
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.
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.
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.
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.
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.
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.
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
First the iMac, then the iPod, iPhone, iPad and the smartwatch – is the iCar next?
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.
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.
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.
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.
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.
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.
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.
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.
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.
Reinforcing their focus on supplier management software, State of Flux Technologies launches a 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.
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.
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.
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.
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”.
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.”
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.
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.”
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.
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.