Category Archives: Procurement News

Is Britain on the verge of a supply chain crisis?

Here’s your weekly digest of supply chain news, procurement bulletins, and ethical issues. Eyes forward for another sweet-tasting instalment…

Britain on the verge of a ‘supply chain crisis’

We certainly hope not… But if these results are anything to go by, then businesses in the UK could be faced with a crisis of faith.

  • Nearly three-quarters of supply chain professionals surveyed by the Chartered Institute of Purchasing and Supply admitted that they had “zero visibility” on the earlier stages of their supply chains.
  • “Consumers and business leaders have entered into a ‘don’t ask, don’t tell’ pact,” said David Noble, the institute’s chief executive. They “are content to remain ignorant of the malpractice that could be operating throughout their supply chains,” he said.
  • It has been 18 months since supermarkets were found to be selling “beef” that included horse meat… Half of supply-chain professionals say the scandal has not led to risks being taken more seriously.

Read more at the Financial Times

Inside a plasma screen factory

Demand for display supply chain is strong

  • Morgan Stanley has recommended four Taiwan-listed stocks in the display supply chain in the third quarter due to increasing demand for ultra-HD televisions and inventory buildups for the iPhone 6.
  • With better utilization of capacity, favorable product mixes and enhanced operating efficiency, most display suppliers are forecast to improve their margins in the second quarter, Morgan Stanley said in a research note last week.

Read more at Taipei Times

Supply concerns cause ‘significant’ risk in nickel prices

  • Nickel prices have increased significantly over the past six months driven by fears over the future availability of the commodity.
  • The price of the metal rose as high as $19,429 per tonne in May – up from $15,653.81 per tonne in February – according to figures from the London Metal Exchange

Read more at Supply Management

Startup surges by stressing ethically-sourced clothes

  • With the surge of fast fashion companies such as H&M or Topshop in recent years, online retailer Cuyana’s message to women — buy fewer, better-quality items of clothing — is a breath of fresh air to some consumers.
  • “The market is flooded with all these cheaper options,” said co-founder Shilpa Shah. ”Our mentality now is if I love that dress maybe I should buy two because the first one is going to fall apart.”
  • Cuyana works directly with suppliers and shortens production time to three to four months. For each collection they source exclusively from suppliers that produce the materials and garments in-house, cutting out another step in the process. Simplifying the supply chain allows Cuyana to sell a leather bag for $250 that would normally retail at $500 to $750 through a luxury retailer like Bloomingdales, said co-founder Karla Gallardo.

Read more at Upstart Business Journals

Huawei go green

  • Huawei has announced plans to promote a greener supply chain as the company releases its 2013 Sustainability Report.
  • A pilot scheme currently underway among 24 suppliers will be extended to cover more suppliers gradually, by which time environmental performance will become a prerequisite for future commercial relationships.
  • “For Huawei, it is not enough to be commercially successful. We strongly feel that we must make social contributions in the 170 countries worldwide where we operate and be committed to minimizing our own carbon footprint as well as that of our customers and supply chain partners.”

Read more at Zawya

Chocolate stock image

Wellington chocolate maker achieves Fairtrade first

  • Wellington Chocolate Factory is the first New Zealand chocolate maker to sign up for the new Fairtrade Sourcing Programme for cocoa, which connects farmers with the growing number of businesses that want to buy their cocoa fairly and sustainably.
  • “It’s a great way to ensure the supply chain isn’t contaminated – and it actually helps us make better-tasting chocolate.” said Rochelle Harrison, co-founder of the Wellington Chocolate Factory.
  • Molly Harriss Olson, CEO, Fairtrade Australia & New Zealand: “This new programme offers a major opportunity for farmers to sell more of their cocoa on Fairtrade terms, and in the first three months of the programme, international sales of Fairtrade cocoa have grown by 20%, adding an estimated €1.8m in Fairtrade Premium to support farmers and their communities.”

Read more at Wellington.Scoop

Geoprise Technologies updates its GM-X system

  • Geoprise Technologies announced the general availability of GM-X Version 5, its robust supply chain Trading Execution System for manufacturers, distributors and retailers.
  • The new system targets the ever-growing need to transact business at top speed, reliability and efficiency beyond the traditional confines of offices, plants and warehouses.
  • The GM-X package has been successfully deployed by several European and American online retailers as the backbone to their front-end Web sites since 2008.

Fast fashion not welcome at Berlin Fashion Week

Join us as we recount some of the biggest news stories making headlines across the world.

Berlin Fashion Week 2014

Fast fashion bumped-off Berlin catwalk

  • 2014 Berlin Fashion Week kicked off on July 8,  and sought to highlight the latest trends in the clothing industry.
  • This year, the main events are the Green Showroom and the Ethical Runway, where brands with a strong social and environmental production record will present their new collections.
  • The Fashion Week’s focus on ethical and “green” collections is a sign of the industry’s growing awareness about the social and environmental impacts of clothing production.

Read more at Deutsche Welle

Child labor probe

  • Samsung has temporarily suspended its business relationship with one of its suppliers after finding evidence of suspected child labor violations at its facilities.
  • The move comes three days after US activist group China Labor Watch released a new report that detailed children working on assembly lines at Samsung supplier Shinyang Electronics in Dongguan, China.
  • The group’s report alleged that several of the seasonal workers in the Dongguan plant were minors who work 11 hours a day, 7 days a week, without overtime pay.

Read more at Cnet

BMW’s Mexican move

  • BMW to build vehicle assembly plant in San Luis Potosí, Mexico
  • The decision underscores Mexico’s increasing importance as a car manufacturing hub following the recent announcement of Daimler and Nissan establishing a joint venture at Aguascalientes.

Read more at Supply Chain Brain

Supply chain needs

  • Brazil’s federal government in the coming weeks should conclude a study of the wind power sector’s supply chain in order to identify bottlenecks and investment needs.

Read more at Recharge News

President Obama

More safeguards for suppliers

  • President Obama and the White House recently announced the “SupplierPay” initiative.
  • SupplierPay is the private sector equivalent of the Federal Government’s QuickPay initiative. Like QuickPay, SupplierPay seeks to lower the working capital cost of small business suppliers by having large businesses pay small suppliers quickly.
  • The initiative also encourages companies to enable financing solutions to help small suppliers access working capital at a lower cost.
  • Apple, AT&T, Coca-Cola, IBM, and Toyota were among the first twenty-six companies to adopt the SupplierPay pledge.
  • Additionally, the USHCC has applauded Johnson & Johnson for joining President Obama’s Supply Chain Initiative

Read more at Wall St. Cheat Sheet

Shipping & logistics industry comes under attack

  • Weaponized malware was delivered into shipping and logistics enterprise environments.
  • It originated from a Chinese manufacturer responsible for selling proprietary hardware for terminal scanners used to inventory items being shipped or transported in and out many countries.
  • The threat has been dubbed “Zombie Zero”

Read more at Supply Chain 24/7

Small and medium enterprises news

  • The government of New South Wales in Australia has announced greater opportunities for SMEs to bid for public contracts.
  • Under a change which came into effect on 1 July, state agencies are now required to look for at least one quote from an SME for contracts worth up to AUS$1 million (£547,000). This will cover around $1 billion (£547 million) worth of deals.

Read more at Supply Management

Research and whitepapers

  • HFS Research has published its very first blueprint report on supply chain management BPO

Behind the scenes of Starbucks global supply chain

As the Seattle-based company seeks to find a foothold in Chennai, interest in the high-street staple has piqued.


A Behind the Scenes Look at Starbucks Global Supply Chain

This insightful piece of film isn’t new but it still offers a fascinating peek behind the scenes of the world’s largest coffee houses.

Cast aside any aspersions you may have and see how Starbucks manages to make 70,000 deliveries a week look easy…

Starbucks global supply chain manages its activities through four distinct functions, namely: Plan, Source, Make and Deliver. Watch the video to see what processes go into achieving each one, and leave your thoughts below.

Would you recommend any changes to the Starbucks formula?

12 things you need to know this week

What’s been top of the news agenda?

Facebook, Tesla, John Lewis, and the Renault-Nissan alliance have all made headlines, so we’ve gathered all you need to know into one handy weekly news digest. We’re useful like that…

John Lewis (Reading, UK)

Crowdsourcing (UK)

  • One of the UK’s biggest organisations is considering using crowdsourcing for indirect procurement to help drive innovation from suppliers
  • The John Lewis Partnership believes that crowdsourcing can help to identify a very specific problem, issue or opportunity and gives a platform to offer a prize for the best solution

Read more on Supply Management

Top Procurement Challenges

  • An Ardent Partners report has highlighted that the biggest challenge for Chief Procurement Officers in the coming year is staff or talent
  • 57% of CPOs believe that flat headcount, stagnant skills capabilities, and / or greater staff responsibility represent their greatest challenge in 2014

Read more on CPO Rising

Australian Industry Changes

  • A study by IBISWorld has revealed the expected industry patterns for the coming financial year
  • Industries expected to rise over the year include Online Education, Building Societies and Mortgages; industries expected to fall over the year include Grain-sheep or grain-beef cattle farming, Automotive electrical component manufacturing and Petroleum refining and petroleum fuel manufacturing

Read more on IBISWorld

Procurement Relationships (UK)

  • The new CPO of Fujitsu for UK and Ireland, Clive Rees, has stated that the focus of Procurement shouldn’t just be on cost reduction, but on relationship management too
  • He has encouraged his team to be seen at stakeholder meetings, change the way the Procurement function is viewed internally and get more value from internal and external relationships

Global Fraud Survey (UK)

  • EY’s Global Fraud Survey has found that more than one in 10 firms globally have experienced a “significant fraud” in the past two years
  • However, when surveyed, 46 per cent of respondents in the UK said offering entertainment to customers to win or retain business was acceptable

Renault-Nissan alliance. Image Wiki Commons

Procurement Alliances (Europe)

  • The procurement function of the Renault-Nissan alliance has reported savings of €1.036 billion (£824 million; US$1.4bn) savings in 2013
  • The Alliance is looking for further synergies in future, but Purchasing was the biggest contributor for cost reductions, cost avoidance and revenue increases last year

Automotive Industry

  • Tesla are set to become one of the major players in the US automotive industry, according to Morgan Stanley
  • Four states are vying for the right to be home to the company’s US $5bn factory and General Motors have even begun to look at Tesla’s culture and success to see if they can replicate it

Read more at Sourcing Guy Blog

Supply Chain Data

  • An article on Supply Chain 24/7 has assessed how to turn Supply Chain data into actionable information
  • According to the article, there are three main ways to use the data – Reporting, Scorecarding and Benchmarking, each providing different levels of information for the organisation to use

Read more at Supply Chain 24/7

Questioning in Leadership

  • Asking the right questions is a valuable skill for leaders to have, but just as critical is how the questions are asked
  • Asking questions in the right way can engage and motivate people, but equally asking them in the wrong way can create a negative mood or blame culture
  • HBR gives an insight into five questions that leaders shouldn’t ask, and the way that they can phrase these questions to get the best answers

Read more at Harvard Business Review

Business Breakdown

  • Coles has admitted to threatening suppliers with sanction if they refused to pay to take part in a new supply chain program
  • The Federal Trade Commission has accused T-Mobile of illegally earning hundreds of millions of dollars by overbilling customers
  • Europe’s privacy regulators are investigating whether Facebook broke local privacy laws when it conducted a highly criticised social experiment in January 2012

Read more at Spend Matters

Former U.S. President Clinton launches peanut supply chain in Haiti

Bill Clinton creates new peanut supply chain in Haiti. Image Wikipedia

Although we’re talking peanuts, there’s nothing nutty about our top story…. Also on our weekly smorgasbord, Coca Cola (and partners) look towards Africa, and a ruling by the FAA means Amazon’s drone delivery programme may never get off the ground…

A supply chain with no allergies

The former U.S. President – together with Canadian philanthropist Frank Giustra – have announced a new enterprise that will provide help to roughly 12,000 small farmers in Haiti.

It is hoped that the Acceso Peanut Enterprise Corporation will help to improve nut yields in coming years.

Clinton said the idea is to “empower farmers to meet the nutritional needs of people.” The project has potential to “scale up Haiti’s peanut supply chain to meet the growing regional demand for peanuts without relying on imports,” Giustra said.

Via Associated Press

Procurement Skills (Global)

  • In the second part of the summary of ‘Skills for the Modern Procurement Pro’, seven final skills have been identified by CPOs for procurement professionals
  • The full list totals 14 skills including Operational Procurement, Supply Risk Management and Leveraging Technology to Drive Business Value

Read more at CPO Rising

Making Procurement Work

  • Raconteur offers their top ten pointers for procurement professionals
  • Their infographic covers both the skills that procurement professionals should be focusing on, as well as tips on how to link corporate and procurement objectives

Read more at Raconteur

Innovation (Europe)

  • The Public Procurement of Innovation Platform has published an online guide to increase subject knowledge of innovation in public procurement
  • The guide is aimed at providing procedures, definitions, answers to common questions to enable stakeholders to engage in innovation in public procurement

Contract Audit (UK)

  • The UK National Audit Office (NAO) has questioned the early award of eight contracts worth £16.6bn for renewable energy projects
  • The NAO believe that the early award was unnecessary and may have cost UK taxpayers more in the long term

Medicine in Africa

  • Coca Cola and its partners, the US Agency for International Development, the Global Fund and the Bill & Melinda Gates Foundation, plan to invest $21 million to get medicine to remote parts of Africa
  • The scheme provides support to government agencies managing the procurement and distribution of medicines and vaccines, from the private sector to forecast demand, ensure availability and maintain cold chain equipment

Read more at Supply Management


Procurement in the Cloud

  • Phillip Allouche, the Global Head of Procurement Solutions at Xchanging, provides some insights as to why procurement technology is moving to the Cloud
  • Amongst other benefits, CPOs are now seeing a significant reduction in the cost of hosting technology applications in the Cloud, alongside a reduction in risk

Read more at Cloud Computing Intelligence

Supply Chain Risk Management

  • 76% of organisations in a recent Accenture survey have identified supply chain risk management as either important or very important
  • The top three sources of risks were identified as information technology, cost and pricing factors and the global economy
  • Analysis revealed three tips for a high ROI in risk management as making risk management a priority, centralising responsibility for risk management and investing aggressively in risk management

Read more at Supply Chain 24/7 


People Management

  • Good managers will look beyond the ‘usual suspects’ when promoting internally or pulling task forces together
  • The article looks at how managers can expand their talent pool to get results and reduce ‘bottlenecks’ in resourcing

Read more at Harvard Business Review

Mobile Procurement

  • Organisations need to make sure that they are in a position to move into the international market before they do so
  • Mobile procurement platforms can be used to assist in this process and to connect with suppliers across borders

Read more at Spend Matters

Supply Chain Delivery

  • The FAA (USA) have officially clarified that the commercial use of drones is illegal, including for the delivery of packages for a fee
  • This may throw a spanner in the works of Amazon’s plans to use drones for deliveries around the US, as currently this would fall under these regulations

Read more at Mashable

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Supply chains need to take action to fight ‘fast fashion’

Young women working in a sweat shop

The fast fashion dilemma

The move toward ‘fast fashion’ is putting major pressure on those working in the procurement departments.

Fashion can cycle in and out of retail stores across the globe in a matter of weeks; putting those in procurement under constant pressure to ensure their supply chain is clean.

For many professionals working in this field, it’s a perpetual battle to balance the insatiable appetite for the latest dirt-cheap fashion with the constant demand that retailers stop the rag trade. Though perhaps not surprisingly, it’s pretty much impossible to find anyone willing to go on the record about how they tackle this issue to ensure their fast fashion supply chain is clean.

There are industry whispers that many procurement missions to places like China can result in more questions than answers. Often, a myriad of ‘agents’ acting on behalf of other sections of the supply chain make it extremely difficult for those in procurement to truly understand who they’re hiring, and whether they’re the sort of ethical supplier you’re hoping for.

This cry for help was found sewed into a Primark garment earlier this week.
This cry for help was found sewed into a Primark garment earlier this week. Darren Britton/Wales News Service

Most recently in Australia, the Australian Competition and Consumer Commission issued a warning about a dangerous dye found in jeans on sale in Australian stores.

Tests uncovered clothes with high concentration of the dyes, which sparked recalls of more than 121,000 items from retailers including Myer, Target, Rivers, Trade Secret and Just Jeans. A number of children’s clothes, including jeans from Myer, Just Jeans and Target, were included in the recall.

This situation will no doubt have caused major headaches for someone working in procurement, somewhere along the line. It’s also an example of why it’s so important for those in procurement to know where and how garments are being made.

After all, it doesn’t take much more than a few questions to be asked and some information to be shared on social media for a major brand to cop a beating over a supplier that’s possibly a long way down the supply chain.

However, some of the big brands have been working hard to clean up their act.

H&M, which is now in Australia, wants to prove to consumers that it’s doing the right thing. According to media reports, H&M has put a plan in place to avoid sourcing fabrics from endangered forest and also promote the use of fabrics that come from Forest Stewardship Council certified plantations. The company will also work to build traceable and sustainable production of these fabrics in its own supply chain.

For other major brands, the answer lies in innovation.

Stephen Denning, supply chain expert and author of the book Radical Management says brands like Zara have solved the problem of how to get disciplined execution with continuous innovation. “The way they lay out their factories, the design team is right in the middle of the factory, so that the whole process of learning from the manufacturers and vice versa is horizontal,” Denning was quoted as saying in The Business of Fashion.

People of Procurious, where do you stand on this “fast fashion” fixation? Make your voice heard and  leave your comments below.

Are limes leaving a bitter taste in your mouth? Find out why…

*We never claimed to be experts of all-things green, but we can tell you a thing or two about supplies…

The past seven days has delivered bad news for Tequila fans… Beats headphones were banned from World Cup, and adidas have been eyeing-up sustainable solutions. It’s all going-off…

Here’s the news in-brief:

Prices of Mexican limes have quadrupled following poor harvest

Supply Chain Prices

· Heavy rains and a poor winter crop has caused a spike in the price of Mexican limes, quadrupling since the beginning of the year

· Mexico exports 467,000 tons of lemons and limes each year globally and these prices will affect the USA in particular

· It’s also bad news around the rest of the world for anyone who drinks tequila or Corona…

Read more at Spend Matters

Sustainability (Germany)

· The adidas Group announced a strategic partnership with bluesign technologies to drive sustainable solutions in their supply chain

· The partnership will include environmental auditing on chemical management processes, as well as provision of information on the use of sustainable materials in manufacturing

Read more at Sustainable Brands

Ethics (UK)

· The UK government has been called upon to create a program reinforcing the requirement for ethical standards in public service contracting

· The Committee on Standards in Public Life also called upon government departments to consider ethics as a “professional commercial capability requirement” in all contracts

Technology (UK)

· Procurement professionals should fully embrace new technology as part of the transformation from a transactional to strategic function

· ‘The Buying Game’ roundtable in Manchester said that there needed to be a shift in culture in order for professionals to get full benefit from the technology

Read more at Supply Management

Consumer News

· The Australian Competition and Consumer Commission has won a court case against Australian supermarket Coles

· Coles’ claim that all their bread was baked fresh in store daily, was successfully challenged as some of their par-baked products were actually produced off-site

Read more at ABC News 

Technology (USA)

· Tesla Motors CEO, Elon Musk, has written an open blog to all companies allowing them to use the company’s patents in their own products

· Musk believes that by sharing the technologies it will drive more companies to produce electric cars to the benefit of the environment

Read more at Supply Chain 24/7

Beats have been banned in stadiums around Brazil

Brand Marketing

· FIFA have banned Beats headphones from inside stadiums at the Football World Cup in Brazil

· Beats, owned by Apple, are popular with public and athletes alike, but as Sony are a partner sponsor of the tournament, the move has been made to protect their market

Read more at CNet

World-class Procurement (Canada)

· Kurt Albertson of The Hackett Group has highlighted how organisations should be focusing on innovation to grow their revenue

· However, an issue cited was how innovation is being defined, with a number of different definitions offered by CPOs

Read more at Purchasing B2B

Child Labour

·  As World Day against Child Labour (12th June) was marked, Human Rights Watch challenged companies to prevent child labour throughout their supply chains

· Throughout the world, there are still organisations conducting business with companies using child labour either knowingly or through not asking questions of their own suppliers

Read more at Huffington Post 

E-Invoicing

· Billentis has released its 2014 e-invoicing report

· The full report is available on the Billentis website and covers, amongst other things, China’s attempts to use e-invoicing to combat tax evasion

Why are supply chain disruption and sustainability our hot topics of the week?

Marks and Spencer

Hello and welcome to your one-stop shop for everything Procurement news-related.

Find out which e-procurement organisation Selectica has acquired… UK darlings of fashion and homeware, Marks and Spencer (M&S) – talk about sustainability, and we learn which countries are most at risk from supply chain disruption.

So without further ado, lets see what’s been going on in the world…

Key Skills for Procurement
• Continuing the blog from the previous week, CPO Rising highlights skills that are required for procurement
• Business Consulting skills can help procurement professionals define scope, manage projects and capture requirements more effectively

Read more at CPO Rising

Iasta acquisition (USA)
• Contract management software provider Selectica has acquired e-procurement organisation Iasta in a deal worth US$7m
• Selectica plan to use the new acquisition to enhance their customer offering by integrating the contract management and e-procurement offerings for enterprises

Global Sustainability (UK)
• UK company Marks and Spencer plan to take their ‘Plan A’ sustainability scheme global
• Plan A 2020, will include new targets around worldwide sourcing principles around issues such as human rights and gender equality

Supply Chain Disruption (Global)
• The FM Global resilience index shows which countries are most susceptible to disruption in their supply chains
• Dominican Republic, Venezuela and Kyrgyzstan were named as the countries most susceptible to disruption
• Norway, Switzerland and Canada topped the list of nations most resistant to such disruption

Read more at Supply Management

Impact of Leadership (USA)
• Guest blog from Samir Patel (Director, GEP) on the Impact of Leadership on Procurement Organisations
• Emphasises the need for strong leadership in Procurement functions and alignment with the wider organisation when considering strategy
• Also gives some good recommendations beyond leadership for optimising the procurement organisation

Read more at the SIG Industry Blog 

Tips for Negotiation (USA)
• Some tips are offered for negotiating when you are in a weak position and how to make the best business case you can
• Tips include being fully prepared, asking questions and listening and keeping cool during the negotiation

Read more at Harvard Business Review

Procurement Focus (USA/UK)
• New study shows that procurement focus is shifting from just cost reduction to innovation and influence
• The Hackett Group study found that only half of the executives surveyed said that cost reduction was their key strategic focus for this year
• 69% of the organisations highlighted a focus on supplier innovation in the coming year

Read more at SDC Executive

What’s been happening in the world of procurement?

Belgium's motorway at night

Here’s your weekly digest of all-things procurement from some of the best industry sources on the web. Aren’t we good to you?

The last week has seen stories on the issue of carbon reduction in Belgium, the ‘rebirth’ of the US Manufacturing industry, and questions asked over the obsession of cost when it comes to procurement marketing.

Eyes down for all the news:

Skills for Procurement (USA)
• Ardent Partners’ Procurement Staff Competency Matrix developed with CPOs has identified a number of competencies for procurement professionals
• Cite ‘Leveraging Technology to Drive Business Value’ as one of the high important competencies from a CPO point of view

Read more at CPO Rising

Brand Procurement (UK)
• CPO of Rexam, organisation based in London, says that individuals should develop their own procurement brand to get ahead
• Alex Jennings offers 5 tips for developing your brand including ‘learning on the job’, ‘engaging with the business’ and ‘surrounding yourself with good people’

Marketing Procurement – ProcureCon Marketing (UK)
• Debate at ProcureCon Marketing highlighted that too many people are still focused on cost when it comes to Procurement Marketing
• Speakers proposed a different view that the primary focus should be working with the right people
• Diageo CPO also told delegates that cooperation between procurement and marketing was essential due to the complexity of marketing procurement
• Kevin Parke, indirect procurement director for Coca Cola Enterprises, also stated that procurement needed to look at the relationship in terms of adding value, rather than cost and price

Carbon Reduction (Belgium)
• AB InBev have pledged to cut carbon emissions in its Logistics operations by 15% by the end of 2017
• This will also save the organisation up to $200m

Read more at Supply Management

U.S. Manufacturing (USA)
• Much of the political conversations in the USA have stated a ‘rebirth’ of the US Manufacturing industry
• However, both Forbes and the New York Times have argued that the ‘rebirth’ is more of a hoax than reality
• The reality is more that this is a balancing of the industry after years of work moving to China and low cost companies

Read more at Harvard Business Review

Business Highlights
• Supplier Standardisation in Procurement – best practices outlined
• Improving the outcome of Government IT Procurement – success factors can include engaging the market early and developing a cost/outcome focused program IT strategy
• New paper available from Spend Matters on getting the most out of your procurement analytics

Read more at Spend Matters 

Social procurement is gathering global momentum

People sitting around a table

Companies bold enough to step into social procurement are discovering that it’s helping solve business problems and also improving the bottom line.

A recent report on social procurement found that the movement is gathering momentum both in governments and private businesses around the world.

The report, Corporate Social Procurement in Australia, was conducted by Australia’s leading social enterprise development organisation, Social Traders and The Faculty, and found that 67 per cent of companies to respond currently undertake social procurement, or intend to do so in the near future.

It found that more than $905 million was directed to social procurement by 11 businesses. This figure is expected to rise quickly, with another 18 respondents committed to connecting social procurement initiatives by 2014. The research included a literature review and a survey of 21 Australian businesses with a market capitalisation of $221 billion.

Many companies tip their toes into social procurement with a pilot program, or undertake work within discrete business areas. Some go on to develop company policies to ensure social procurement becomes the norm.

A program’s success is usually measured by jobs created, volume and percentage of total money spent, and the value delivered to the organisation and the community.

Leighton Contractors chief procurement officer, Visna Lampasi is one of those in this space to facilitate a significant engagement project with indigenous businesses into the supply chain, increasing expenditure with indigenous suppliers to $3 million last year, with a $5 million target set for this year. This achievement has gone partway toward seeing her named CPO of the Year for 2014.

Craig Laslett, managing director of Leighton Contractors says the company believes it has a responsibility to contribute to the growth and advancement of Indigenous people and communities.

“Our organisation-wide focus on strong leadership and advocacy for Aboriginal and Torres Straight people and their communities starts from the top, with my personal commitment to enhancing the lives and opportunities for Indigenous Australians.”

Leading Australian construction, mining and services contractors, Thiess Services moved into this space more than a decade ago when it invited a social enterprise specialising in land care management, Marriott Enviro Services, to provide workers for landscape operations to general maintenance, grass and garden maintenance and painting.

Since 2009, Thiess has spent around $1.3 million a year with Marriott, which employs a large number of people with a disability.

Cadbury

Australian FMCG brand Cadbury also made a strategic decision to shift to Fair Trade certified cocoa in 2010, at a cost of $45 million. Soon after this, Cadbury became the world’s largest buyer of certified cocoa, with sales increasing.

Todd Stitzer, CEO of Cadbury said in an interview included in the report that: “The greatest power consumers have is of their buying dollar … if consumers feel that they want products more ethically produced, they should buy what they value.”

And yet, many corporates have little understanding of social procurement.

Matthew Bonwick of The Faculty Management Consultants says that the greatest challenge to the implementation of social procurement is where to start.

The key is to start small and work up to bigger things, he says.

“Many passionate advocates can be found on the ground floor of corporates, so identify existing leaders from within before scaling up,” he says.

Broad spectrum adoption from within a company is critical to corporate legitimacy in the medium run, he says.

“As markets develop and consumers become more educated, these strategies will become defining elements of competitor advantage. And key enablers will be passionate people and strategic senior managers who are willing to support the learning curve.”