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4 challenges procurement faces & how to overcome them

Results from a newly published study shine a light on an assortment of internal challenges facing the procurement function, as well as its changing role as we enter an uncertain future.

Xchanging has issued the first results from its 2015 Global Procurement Study of more than 800 procurement decision makers. 

These first set of results look at internal challenges and the new role of procurement, covering misaligned KPIs, lack of internal engagement, capacity issues and skills gaps.

Challenge #1: Misaligned KPIs

Despite the now wide ranging responsibilities of procurement decision makers, 47 per cent name ‘cost savings realised’ as their number one KPI. The top four KPIs listed are all cost related. CSR/Sustainability impact, by comparison, is ranked as the least important at just 1 per cent.

Chirag Shah, Executive Director, Xchanging Procurement comments: “These results strongly indicate that there is a problem with the current KPI structure. Procurement teams are responsible for many business critical functions. From risk management to sustainability impact, procurement is engaged in activities that far surpass its cost-cutter legacy. The metrics against which organisations track procurement’s performance do not line up with what procurement actually delivers.”

Challenge #2: Lack of Internal Engagement

63 per cent of procurement decision makers globally identify ‘internal stakeholder engagement’ as a challenge, with 14 per cent claiming it is as an extreme challenge.

Shah explains: “Procurement’s strategic capability isn’t being understood and because of that, it isn’t appropriately valued. Not only is this causing problems for procurement performance, it is also restricting business success; by not engaging with the procurement team and fully understanding what it can deliver as a strategic partner, companies are limiting their potential for growth.”

CPOs clearly feel more internally valued than procurement middle management; 60 per cent of CPOs feel that procurement is a C-level priority in their organisations compared to 37 per cent of procurement middle managers.

Shah makes a number of recommendations based on the findings: “To improve internal engagement, and properly communicate the value of procurement, procurement departments need to consider tactics such as introducing governance boards, using score cards to track deliverables, leveraging analytics and reporting tools to demonstrate results and even re labelling team members with non-cost centric job titles that relate to their roles, for example ‘Risk Manager’ or ‘International Consultant’”. 

Challenge #3: Capacity Issues

According to Xchanging’s numbers – 80 per cent of procurement decision makers identify ‘procurement team time pressures’ as a challenge, and 20 per cent as a major challenge – implying that the majority of procurement departments are facing major capacity issues.

Surprisingly, in comparison, ‘talent shortage’ is considered an operational challenge by far less respondents, with 59 per cent citing it as a challenge and only 12 per cent as a major challenge.

The number citing talent shortage as a concern drops to less than half (40 per cent) when asked if it’s a problem for the industry as a whole.

xchanging

Challenge #4: Skills Gap

The skills considered most important for procurement professionals are ‘relationship management’ (88 per cent consider important, 59 per cent very important) and ‘negotiation skills’ (88 per cent and 58 per cent).

Significantly, these are also the areas where procurement decision makers identify the greatest gaps in skill set provision; around a quarter cite ‘relationship management’ (26 per cent) and ‘negotiation skills’ (23 per cent) as areas with the greatest gap in skill set provision. 23 per cent also name ‘project management’.

Want to read more? The full report can be downloaded here.

You need a plan: managing risk in the supply chain

Increased complexity in supply chains means increased risk, coupled with unprecedented visibility from social media and a lowered public tolerance for disruption – in other words, a perfect storm. For my last session of ISM2015 day two, I’ve come to find out about what supply chain professionals can do to weather the storm and become their organisations’ risk-management experts.

Hannah Kain speaks earnestly and authoritatively, with a dry sense of humour. She’s the president and CEO of ALOM, a global supply chain services provider that has been operating for almost 20 years primarily in the electronic and technology space. It’s headquartered in the Silicon Valley and works with tech, automotive and medical companies – in short, cutting edge players that use Kain to solve their complex supply-chain challenges. Kain’s here today not just to lay out the challenges involved in operating supply chains in the age of social media, but to give the audience some solid and invaluable advice on minimising risk.

The context

Procurement professionals have to navigate more layers, more partners and more regulations than ever before. They’re dealing with globalisation, compressed timelines and increased customer expectations around speeds, prices and visibility. Corporate boards and the public are no longer just interested in what supply chain professionals are doing, but how we are doing it. The reason behind this is that procurement is moving from the back to the front of organisations. Visibility has changed, expectations have changed, along with the nature of communications and global immediacy. We’re not used to this level of scrutiny, but it isn’t going to go away.

Brand risk factors include social responsibility, cultural sensitivity, cybersecurity (40 per cent of data breaches happen through the supply chain), personal conduct, customer service, ethics, regulatory compliance, sustainability and, of course, quality. It’s important to understand that we’re all stakeholders in our organisations’ brand, from the board of directors through to shareholders, customers, suppliers, the community and employees.

Social reputation

Millennials are very concerned about the social reputation you have as a company. Kain’s blunt observation that “if you have a poor brand reputation, you have a hiring problem”, made me think of the NSA and its recruitment woes after Edward Snowden.

An example of a well-executed risk strategy was Adidas’ enforcement of its workplace safety policy in 2014. The company drove standards aggressively amongst its Asian suppliers, issuing 66 warning letters, dumping 13 suppliers for non-compliance and rejecting 104 new suppliers over safety concerns. No doubt this was a costly and difficult process but the flow-on effect is a greatly improved public perception of Adidas’ social responsibility, and of course a lessened risk of supply chain disruption through accidents in the supply chain.

Ensuring regulatory compliance is now a significant part of a procurement professional’s role. Kain praises some of the laws that have been passed recently in the US, making the point that rather than seeing regulations as a headache, CPOs should embrace them as a well-structured way to minimise risk. The Conflict Minerals law, for example, exists to ensure raw materials are not sourced from the Democratic Republic of Congo, where rebels are using indentured labour and channelling the revenue to fight a brutal war. US public companies are required to trace the origins of their metals all the way back to the smelter level – in practise this means auditing as many as six levels back down the supply chain.

Similarly, if you sell over $100 million of product in California, you have to certify that no child labour has been used in your supply chain – a very high standard to meet. As with Conflict Minerals, it’s a huge but worthwhile task to audit an entire supply chain. The real headaches start, however, when your company has two suppliers of a product to avoid disruption, or even three – this means the size of the auditing task is doubled or even tripled. In consequence, CPOs are now concentrating their supply base, often to a single trusted supplier. These regulations really delve into the “how” rather than the “what” of supply chains and illustrate Kain’s point about unprecedented transparency.

Retouch-ce_HannahKain277-hi

Kain divides risk-management strategies into two categories; preventative and reactive. Both are equally important and I soon learn that risk-management is a lot more complex than I’d thought.

Preventative risk-management strategies

  • Preventative strategies are best for stable industries, public companies and high-profile organisations with good alignment, a culture of planning, strong conceptual corporate supply chain staff and reward planning.
  • Put in place a SCOR (Supply Chain Operations Reference) model: create objectives, KPIs, measures, targets, KRIs, loss tracking initiatives. Assign numeric value to disruptions.
  • FMEA (Failure Mode Effect Analysis) method: identify failure points and causes, predict the potential frequency of failure, assign numerical probability and severity factors resulting in a Risk Priority Number (RPN), document your mitigation strategy and response actions.
  • Manage based on data: establish a dashboard and a supply chain event management system with alerts and pre-alerts on the state of your suppliers.

Reactive risk-management strategies

  • Reactive strategies are best for fast-moving, smaller and innovative companies with a culture of agility, resourcefulness, entrepreneurship. These organisations reward resourceful fire-fighting and focus on minimising disruptions that have occurred.
  • Have a communication plan on social media: the response should come from senior management level. Acknowledge the problem, know the facts, be truthful initiate a solution and define escalation actions.
  • Poor reaction: Lululemon’s reaction to customer complaints on social media about transparent fabric was to blame the issue on customers’ weight, rather than taking responsibility for the quality. The result? A social media storm, sending the stock price tumbling 15 per cent in one day, followed by a two-year recovery process.
  • Good reaction: In response to reports on unsatisfactory working conditions, Apple’s CEO regularly visits Chinese iPhone suppliers to meet with employees, management and government officials.

Kain’s eight tips for putting out fires on social media

  • Prepare for the worst – have a plan
  • Take responsibility
  • Put consumer and work safety first
  • Respond quickly, sincerely and truthfully
  • Be real – personally respond and take it offline if possible
  • Respond privately to personal inquiries
  • Fix mistakes expediently
  • Arguing with social media users is always a bad idea.

Kain concludes with a reminder that your supply chain and brand are intertwined. Risk is always present and disruptions are inevitable – you need to be both proactive and reactive to minimise and deal with events as they happen.

Founded in 1915, the Institute for Supply Management (ISM) is the first and largest supply management association in the world. A not-for-profit association with 47,000+ members and 140+ affiliated organizations around the globe.

ERP or SAAS – Why Have Two?

In an evolving, modern procurement environment, how do you keep up with the pace of new business practices? In recent years we have seen the emergence of Procure To Pay (P2P) and P-Card systems that work in isolation from ERP systems, or as expensive modules as part of an ongoing ERP investment.

General dissatisfaction with P Cards, and expensive, time consuming ERP Modules have led many organisations to look at flexible, less expensive cloud based Procure To Pay solutions (or Software As A Solution – SAAS).

Understanding how SAAS applications can provide flexibility when utilized alongside an ERP system is an ongoing challenge to Procurement and Finance teams – particularly in non trade and intangible procurement categories (such as Marketing). 

Identifying a suitable bolt-on SAAS application is only part of the issue – convincing IT and CFO’s of the considerable savings to be made by taking a step outside of existing platforms to drive savings is difficult given the ongoing investments typical of an ERP system. ‘Can’t our ERP do that?’ is a typical question. And the answer is YES – But at what cost, time and upkeep?

Most SAAS applications are often delivered to a less tech savvy audience and are therefore more user friendly (i.e. less intimidating) and end up with a higher adoption rate – reducing change management timeframes. And the right SAAS solution will drive compliance through convenience, as well as providing internal controls that P-Cards cannot – bringing discipline to purchasing across many departments by enabling rules and the internal control of suppliers.

The ability of modern cloud based P2P applications to work within an organisation’s financial rules, without the need to compile external usage reports (and not endure hefty monthly interest fees) from P-Card suppliers provides a data store that can be used to track, plan and negotiate with suppliers. Any good SAAS Application will enable direct data export into ERP platforms – providing best practice to a procurement team through both compliance and information.

As cloud based P2P’s gain acceptance, Procurement Managers face the challenge of identifying solutions that will sit comfortably alongside their ERP systems, while providing the flexibility and responsiveness that many ERP modules cannot.

How will your organisation respond?

Can social accounting change our supply chains?

Olinga Ta'eed speaking at the Procurious Big Ideas Summit

I’ve said this before, but I think we get the supply chains we deserve.

As consumers we want the cheapest possible clothes, mangos in the middle of winter, low cost technology products and effective cosmetics.

When you couple these consumer preferences with the fact that the major players in our supply chains are ultimately answerable to shareholders whose sole motivation is a dollar return on investment, a level of unscrupulous supply chain behaviour appears inevitable.

We can blame big companies, CEO’s, CPO’s, suppliers or third party contractors all we want, but under the current model, consumers have to take some responsibility for what happens in our supply chains. It’s consumers that drive the competition and at the moment that demand seems to be based around convenience and price over everything else.

Are CSR and profit diametrically opposed?

Reading and writing endless stories on unethical supply chain practices has prompted me to think on these market dynamics a lot and to be completely honest, I struggle to come up with an answer as to how we can integrate social concerns and ethical business practices into a model that is in its very essence, profit driven.

For me, the two seem to be at odds with one another. That’s why I was interested to hear Professor Olinga Ta’eed speak about the importance of social accounting and including social metrics in our company reporting at the Procurious Big Ideas summit two weeks ago.

For a long time I’ve been sceptical about companies’ commitment to CSR and ethical corporate behaviour, they’ve always looked a little fluffy to me. Sure, it looks great on a webpage or in a brochure, but I can’t help but feel the majority (not all) of these initiatives are window dressing for marketing purposes or simply box ticking for the benefit of an audit.

I believe the reason that CSR initiatives have been fluffy for so long is that it is intrinsically difficult to measure something so subjective, so sentimental and we all know that (brace yourself for a painfully over used business mantra) “if you can’t measure it you can’t manage it”.

A shining light?

Olinga and the team at Seratio have set out to address this predicament with the development of a Social Earnings Ratio (S/E). A business metric designed to provide an insight into a firm’s social performance. The S/E metric claims to:

“Harness the full breadth and depth of information in the social impact marketplace to create visualizations that uncover key insights, translate any index or metric into a comprehensive set of measurements generated specifically for you. The S/E metric can be applied to whole organisations, projects and processes across public, private, third and community sectors.”

It is hoped that the S/E metric will be rolled out to one billion businesses by 2020. It has already gained traction in the UK with the Social Value Act 2012 and the Modern Slavery Act 2015.

The Model T Ford

As I mentioned earlier, social reporting is very much in its infancy. Many firms try to report on it, but the lack of a common metric, or group of metrics, has meant there has no been real standard for reporting success in this area. This combined with the vast amounts of time and resources required to carry out these initiatives had lead to an approach of reporting social value that has been piecemeal at best. This is precisely why the S/E metric was designed with the following parameters in mind, price, consistency, comparability, speed and accessibility.

Olinga outlined that the S/E metric can provide a window into a firms social performance in 10 minutes and for a cost of only five pounds.

It may be early days now, Olinga referred to the SER as a model T Ford for measuring social value, but perhaps if can we start to generate solid comparable social metrics, consumers will start taking companies ethical performances more seriously when considering purchases. Achieve this and perhaps it’s possible to envision a more sustainable and just global supply chain.

Electrolux has 6500 people working on Big Ideas today

Big Ideas? How’s this for a Big Idea? On 11 May, thousands of Electrolux employees across the world began a 72-hour innovation-fest designed to develop new ideas for the future of fabric care. 

REDPIXEL.PL/Shutterstock.com

The initiative, named iJam, is a crowdsourcing event where employees are encouraged to collaborate with one another online to come up innovative product improvement solutions that can be integrated into Electrolux’s business.

The event is facilitated through software platform that connects employees across the globe. The program enables participants to raise ideas, collaborate with one another and to comment on and promote the ideas that are raised.

While all ideas generated are fed into the company’s product development team for consideration, there are also winners! Once the 72 hours is over, a team of product developers will select the 20 best ideas, which along with 10 ideas voted in by participants, will be presented to the company’s management team for consideration. The management team will then select the three ideas it believes have the strongest commercial impact and will commit resourcing to further developing these ideas.

Last year’s iJam project had over 6500 participants, generated over 1500 ideas, 8700 comments were posted and 11,500 votes were cast. As a testament to the success of the initiative, two of the three winning ideas from last year’s iJam are now in mainstream development at Electrolux.

While iJam is reserved for internal employees, the firm runs another initiative, the Electrolux Design Lab, which drives innovation through external crowdsourcing initiatives. The Design Lab encourages design students from across the globe to contribute product ideas and developments to Electrolux.

This cross-functional approach is a great example of how innovation can be implemented even in the largest of organisations.

The ideas that are generated through this initiative have already undergone a significant vetting process. Ideally, a person comes up with an idea that is reviewed by someone from marketing, someone from product design, some from procurement etc. etc. Based on the feedback gained, the ideas are altered, meaning that by the time they reach the management team, each idea has already been exposed to a fair level of criticism and cross-functional thought.

It’s a great idea. I look forward to hearing the results of their work!

Got a Big Idea of your own? We want to hear it (provided it’s less that 60 seconds)! Find out more here.

As a Procurious member you can access our exclusive Big Ideas Summit video content online – just join the Group page to view.

Why design eats discipline for breakfast

Dan Gregory shared his views on fostering innovation, lifting team engagement, understanding customer mindsets and exploring what makes you tick as a leader.

Dan Gregory

Driving change is about two things: Discipline and Motivation. Right? Wrong, says Dan Gregory, President and CEO of The Impossible Institute and regular on The ABC’s Gruen Transfer. 

Leaders, personal trainers and new-age coaches, strive to motivate us in order to lift performance, while high achievers and perfectionist Virgos turn to punishing self-discipline to achieve their goals.

Discipline and motivation are great, but the problem with both is they are only ever intended to be used in short bursts, to effect short-term change.

“No one – not even the impossibly perfect Michelle Bridges – is disciplined in every aspect of their life, every moment of the day,” reminds Gregory.

And what happens when these short measures fail?  We feel let down, we blame the people involved (often ourselves) rather than the strategies we’ve chosen. (Anyone who has ever been on a diet knows this feeling!)

Speaking at the Future Leaders in Procurement Forum (FLIP 2015) in Melbourne on 12 May, Gregory offers his own personal example: 

“Last year I decided I wanted to spend more time at home. I was driven I was disciplined.  But at the end of the year, when I looked back on my own ‘on time performance’, no matter how meticulous I was about turning off the computer at 5pm, it never made much difference.”

“And here’s the design flaw,” says Dan, “I live one hour’s drive from work. That’s two-hours per day and an extra 10 hours a week,”

Procurement professionals will already be doing the math:  This equates to 52 extra (long) days a year, which is very nearly an annual total of an extra 2 months a year away from home!”

Motivation won’t solve that problem.  Discipline can’t solve that problem.

This is a design failure. 

Forget cheesy motivational slogans, or brutal self-discipline. If Gregory simply moved the office half an hour closer to his home or vice versa), he would almost effortlessly gain an extra month a year at home.

And here in lies the real problem – we don’t design for failure in our lives or in our industries. 

Aeronautic engineers are a different breed: They build failure into their designs and processes. 

Citing the example of Captain Richard de Crespigny and the miraculous landing of badly damaged QF32, Gregory notes that in most cases, even if half the engines go down, the A380 just about refuses to fall out of the sky.

Stop and think for a moment what would happen to your business if 50 per cent of your customers went elsewhere, or half of your workforce didn’t show up?  

Sobering, no?  

Gregory’s advice to Procurement leaders is to start by thinking about where you’re applying discipline… and where design would achieve a better, more lasting outcome.

“Design the process to fit the people, not the other way around,”

“The real key is how long you need the change to endure,” says Dan, “Because in the long run, design will always trump discipline.”

Big Ideas: How to Deal with Monopoly Suppliers

I feel like I’ve written a lot about Chris Lynch’s speech at the Big Ideas Summit, but the Rio Tinto CFO’s keynote was packed with useful information and provided some great ‘outsiders’ perspectives on what procurement, as a function, is capable of.

So… I’m going to bring up one more point he raised (I promise this will be the last).

Chris recounts the story of when his company was faced with the challenging situation of a monopoly supplier. The supplier was critical to his organisation’s operations and ultimately, its success. There was no one else in the market that could possibly do the job this supplier did and the supplier knew this. A competitive bid was impossible, the price was set high and the room to negotiate was almost non-existent.

If you can’t beat them, be them

That was until the procurement team came up with the innovative idea of creating what Chris called a virtual competitor.

Chris goes on to detail the steps the team took to drive this initiative; an initiative Chris stresses, was conceived and driven by ‘procurement and procurement only’.

Essentially, Rio Tinto called the monopoly supplier’s bluff. Rio Tinto’s procurement operations put together a team and tasked them with determining the cost of creating a new business that could produce the exact product the monopoly supplier was providing them.

Their efforts were meticulous from end-to-end. Raw materials costs were calculated, as was the cost of fabrication and warehousing. The team built a full end-to-end supply chain and cost structure for this good (all conceptual of course).

Now you know where you stand

By undertaking this process, Rio Tinto got a real understanding of what a ‘fair price’ might be for the product they required. But more than that, they sent a stern message to the monopoly supplier that they’d done their research and if need’s be, they could make arrangements to begin producing the product themselves.

This obviously brought the supplier back to the negotiating table and put some real competitive tension back into a relationship that had previously been very one sided.

Obviously, this is not a move that can be done by every business. Rio’s size, access to resources and the strategic importance of this particular contract made the project possible. But it does highlight that when faced with a seemingly unsolvable situation, empowering your people to think outside the box can produce real tangible results for your business. These are the sorts of innovative approaches I’d love to see more of in the procurement space.

And here end my tributes to Chris Lynch’s Big Ideas speech.

Big Ideas? I’m sick of hearing about organisational silos

Mikael Damkier/Shutterstock.com

If there is one comment at conferences that kills me it’s the old “we work in siloed organisations” argument. How many times have we heard this? Your boss, conference speakers, the pages of the Harvard Business Review and countless business ‘self help’ books have discussed and debated this phrase ad nauseum.

To be honest, I’m over it. Someone mentions silos, everyone agrees they are bad, then, in the same gasp of breath, we move back into talking about how we can strengthen procurement’s image within the business (often at the expense of another function) or we start a debate over which metrics best represent our existence as a function and the silos we just outlined as problematic are further reinforced.

Hopefully procurement will be gone in 2030

My cynicism aside, I did hear something at the Procurious Big Ideas Summit last week that gave me some hope. When asked about where he thought procurement would be in 2030, Chris Lynch, the CFO of Rio Tinto said… Gone (as in it will no longer exist). The crowd of largely procurement professionals raised a collective eyebrow.

Chris went on to highlight that functions (or silos as we so often refer to them as) are not necessarily be the ideal way to drive change and innovation in an organisation (particularly one as large as Rio Tinto). He even went so far as to suggest that large organisation may even stifle innovation and stressed the need for intrapenuers to break down these barriers.

Chris’s comments, along with a few other sound bites I took away from the day got me thinking about traditional organisational structures and how unproductive they are.

It’s not about delivering procurement value. It’s about getting stuff done

We’ve all had that feeling at work when know something could be done better, a process improved, a step removed, whatever it may be. But more often than not, internal bureaucracy and politics end up shutting these ideas down before they ever get legs.

Our current organisational structures require workers with improvement ideas to first speak to their manager (who is normally busy with myriad other tasks) about the problem. Once the manager is convinced it’s a good idea, we proceed up the chain to achieve the required consensus. This process is slow, time consuming and ultimately disengaging, it’s easier just to let the idea die than to jump through the requisite hoops.

The ideas that actually make it through this arduous process are not necessarily the best business ideas either. They tend to be the best procurement/<insert function here> ideas. Our consensus gathering and approval processes mean that ideas are reviewed and processed through a procurement lens. We ask ourselves ‘will this initiative be good for the procurement function?’ (or more cynically, will this initiative help me achieve my KPIs) rather than ‘are we fixing something that IS broken or are we developing a revolutionary new idea?’

How often have good business ideas been stifled because it’s “not within procurement’s remit” or “this is going to shake the boat with the finance team”?

I’ve been going to procurement conferences for more than a decade now and I’ve heard the endless argument about how everyone forgets about procurement’s value and how no one understands how good we can be. But are we creating a rod for our own back? When will procurement stop solving ‘procurement problems’ and start getting stuff done?

Who cares where good ideas come from?

Chris Lynch’s insights hint that there is hope in this sphere, he said, he doesn’t care where good ideas come from, procurement, finance, operations, who cares? A good idea is a good idea and we should act on good ideas.

Perhaps a flatter organisation structure (not dissimilar to what we’re seeing in the tech and start-up space) is the answer.

To me, a flatter functionless business (or least a business with less functional hierarchy) could empower staff by giving them more autonomy to act decisively. Autonomy to act spreads leadership throughout the business and removes the culture of protecting your (or procurement’s) patch from a business.

We need to remember we ARE working towards company goals, not procurement goals and ultimately the way we serve our customers, not our bosses, is the mark of a strong business. Maybe cross-functional teams are the answer today but, in support of Chris Lynch’s idea, I’d like to hope that no-functional teams are not too far off.

How to Spot Supplier Risk in Communication

Communication is a critical component of any business and is no less crucial in supplier relationships.

Thanks to Spendrix for granting Procurious permission to republish this article. This article kicks off a series on how to identify various types of supplier risk.

When your company has great communication with suppliers, it can be like adding another department to your organization. There are a large number of suppliers who do an excellent job communicating with their customers. You probably have several suppliers you can think of now that practice excellent communication. What is it that sets these suppliers apart?

First, better communication leads to more efficient business practices. This can be seen in being able to respond to customers quickly and with thorough information. Also, suppliers that communicate well understand your company’s objectives, and how their business fits into these objectives.  As you know, when a supplier has these traits, errors related to communication issues are much less common.

Unfortunately, there are a number of suppliers that are not as transparent with their customers as they ought to be. This break down in supplier communication can introduce various risk factors into your supply chain. The question then becomes, ‘how can you spot risk in supplier communication?’

The Details Simply Don’t Align

You may have a contact you normally deal with when working with a supplier. This is the person you go to with new jobs, or when you have any questions to clear up. However, what happens when your contact provides you with inaccurate information?

For example, your contact may have quoted a new job at a certain rate, but the official documentation says otherwise. Another example may be stating that a truck is in transit when the GPS tracking shows that the truck is stagnant at a truck stop.

Accidental or not, these mistakes slow down your business, cost you money, and damage that supplier’s relationship with your company. If mis-aligned details become a recurring problem, it’s probably time to find a new supplier.

Non-Responsive to Outreach

When you can not reach your supplier, or attempt reaching them multiple times without any follow-up on their part, you should start to be wary.

Does the supplier not value your business? Do they lack the man-power or technology to field incoming communications and respond accurately and promptly? More importantly, how will their delayed responses effect your company if something goes wrong during a job or you need a piece of vital information to relay back to your customer?

A delayed response could have devastating costs in situations like these. Overall, it is hard to put a lot of trust in non-responsive suppliers as you never know when you’ll hear from them next.

Won’t Answer Direct Questions

As you know, suppliers with great communication can be relied upon time and time again as valuable components of your company. Generally, you have a detailed knowledge of these suppliers, and trust the information they provide.

However, the same can’t be said for suppliers who routinely dodge difficult questions or provide you with answers that don’t get to the core of what you’re asking immediately.

Whether they aren’t actively listening during your conversations or simply don’t have the adequate industry knowledge to appropriately answer, these are major causes for concern.

Effective communication is a cornerstone of strong relationships between your company and suppliers. Such relationships, especially with strategic suppliers, are often collaborative, and both your business and your supplier’s business grow together.

Conversely, poor supplier relationships present a threat to your business; however, it is possible to hedge against supplier risk. By identifying supplier risk via their communication practices, you can work to eliminate these suppliers from your business or reduce their role in your supply chain.

Ben Goldwasser works as a Business Development Lead for Spendrix, an organisation specialising in supplier risk and quality analysis in shipping and logistics.

McDonald’s commits to remove deforestation from its supply chain

Fast food giant McDonald’s announced on Tuesday that the firm would take action to end deforestation across its supply chain operations.

The company detailed the following eight points as the cornerstone of its commitment to halting deforestation:

  • No deforestation of primary forests or areas of High Conservation Value,
  • No development of High Carbon Stock forest areas,
  • No development on peatlands, regardless of depth, and the utilization of best management practices for existing commodity production on peatlands,
  • Respect human rights,
  • Respect the right of all affected communities to give or withhold their free, prior and informed consent for plantation developments on land they own legally, communally or by custom,
  • Resolve land rights disputes through a balanced and transparent dispute resolution process,
  • Verify origin of raw material production and
  • Support smallholders, farmers, plantation owners and suppliers to comply with this commitment.

The commitment is expected to mean big changes within the company’s supply network, with more than 3,100 of the firms suppliers expected to be impacted by the new code.

Michele Banik-Rake, a sustainable agriculture expert at McDonalds, said that the initiative for the new code was actually driven largely by the firms supply base. “The question that was coming back to us was, ‘As suppliers, we have stronger commitments than you do as a company, so why don’t you make the same commitment?’ I couldn’t argue with that logic, right?” she said.

Questions have been raised as to where the responsibility for McDonald’s commitment to deforestation starts and ends. It’s one thing for McDonald’s to have a policy that impacts the firm’s direct suppliers, but perhaps the biggest challenge will come from ensuring that the third party plantations and farms that McDonald’s do not hold a direct relationship with will abide by these practices.

McDonald’s commitment to deforestation mirrors moves made by others in the fast food space recently including Krispy Kreme, Dunkin’ Donuts and Yum Brands. David McLaughlin, the vice president of agriculture at the World Wildlife Fund (who advised McDonald’s on its new commitment) was quoted as saying: “McDonald’s brings size and scale to the debate of sustainable sourcing. Their reach is large, they are global, they work closely with the suppliers and so this outreach can only help.”