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.
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.
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.
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.
Dan Gregory shared his views on fostering innovation, lifting team engagement, understanding customer mindsets and exploring what makes you tick as a leader.
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!)
“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?
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.”
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.
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.
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.
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.”
45 years ago April 22 was just a normal average day… If it had been a colour, it would be grey. Unremarkable. Now it is forever marked in history as Earth Day – the original Earth Day occurred in 1970 and saw scores of people gather across the globe to show their support for greener policies.
Fast-forward to 2015 and more than 1 billion people from 192 countries have come together to build environmental democracy and to broaden, diversify and mobilise the environmental movement. Improvements in industrial development can be observed in corporate sustainability targets and the expansive range of sustainable products filling our shops and lining our cupboards. Yes, more companies are engaging with the issues firsthand – with the proposal of realistic goals, tangible progress is happily being achieved. The bottom line is now the Holy Trinity of people, profits AND planet.
If you happened to be in Washington last Friday you’ll have enjoyed Usher, Mary J. Blige, and Gwen Stefani (among others), performing at the free Global Citizen 2015 Earth Day rally hosted by rapper/entrepreneur will.i.am and journalist Soledad O’Brien. The event tied neatly in to the IMF/World Bank Spring Meetings – an early opportunity for world leaders to gather before they set the world’s sustainability agenda at the UN General Assembly in September.
The assembled throng counted world leaders and corporate innovators among its numbers – top of the agenda were rallying calls to end to extreme poverty and eliminate the threats posed by global climate change.
“Whether it’s the big migrations we expect to see or soil depletion or emptying the oceans, loss of species, loss of timberland — all these things are creating poverty at the same time that they are also creating climate change issues. Eliminating poverty will require solving climate change” – Kathleen Rogers, Earth Day Network president
The day saw a total of 33 commitments announced: education, water and sanitation, food security, health, political action, marine protection, and environmental awareness were all among them.
World Bank Group, President Jim Kim said:“Each person must do their part. We need engineers and entrepreneurs, we need doctors, we need lawyers, artists, teachers, we need students and activists – we need YOU. We are the first generation in human history with the opportunity to end extreme poverty.”
Also in attendance was the organiser of the very first Earth Day – Denis Hayes:“Climate justice is THE issue facing this generation. Ruthless, powerful carbon companies are buying votes and lying like the cigarette industry did for so long. So far, they are winning. The main power on the other side is you—you and billions of other people who actually care about tomorrow.”
A group of leading scientists and economists have added weight by issuing a chilling warning today – stating that three-quarters of known fossil fuel reserves must be kept in the ground if humanity is to avoid the worst effects of climate change.
Johan Rockström says: “It’s so frustrating, because it’s the choice of moving down a business-as-usual route with devastating outcomes for humanity and, at the same time, we have this almost unprecedented opportunity, we can transform the world economy to a fossil fuel-free one and moreover do it in a way that is security and health-wise more attractive.”
Turning Back The Clock
Steven Cohen, Executive Director of Columbia University’s Earth Institute– writing for The Huffington Post neatly summarises the challenges such an initiative needs to tackle head-on:
Sustainability is at or near the top of the modern global political agenda. At the core of that agenda is the need to:
Protect ecosystems and biodiversity;
Mitigate and adapt to climate change;
Protect and enhance water supply and quality;
Ensure adequate and healthy food;
Develop sustainable cities built with renewable energy and efficient transportation systems.
Reduce the impact of human-created waste on natural systems.
Develop businesses that minimize environmental impacts and maximize the use of renewable resources.
Steven notes: “We still have a lot to learn. We continue to extract and burn fossil fuels at a ferocious and destructive rate. The transition to a renewable resource based economy will be the theme of Earth Days for the next several decades. The institutional inertia and sunk costs of elements of the economy that depend on finite resources will not be easily addressed.”
Bob Langert, former Vice President of Sustainability, McDonald’s suggests that today’s society is in need of a reality check: “The consumer is less engaged today than in times past. We need a real surge to engage the consumer, or “sustainability” will be a niche that serves only a small segment of the marketplace.”
The 1990’s bought recycling to the fore but the enthusiasm (and novelty) soon wore off – and although recycling initiatives have become a part of modern society, the fervent desire once exhibited has now waned.
Bob continues: “While the consumer movement is quiet, the corporate environmental movement — including corporate collaborations with NGOs — is on fire. In 2005, Walmart worked with the EDF, Conservation International and others to put in place bold environmental goals, including zero waste. Similar actions and partnerships came from Unilever, Nestle, Nike, Coke, General Mills and General Electric, among others. For example, Coca-Cola has a “water neutral” goal. These aspirations, goals and progress are amazing.”
A Time For Change, Not For PR
Forbes notes that dozens of iconic US food, consumer and manufacturing giants (many of them Fortune 500 companies) such as Kellogg Co., Unilever, PepsiCo, Starbucks, Nestle, Mars, Gap Inc., L’Oreal, and Ben & Jerry’s will all be gathering on Capitol Hill to deliver a single, focused message to Congress.
Speaking to Forbes, Tim Brown, President and Chief Executive Officer – Nestlé Waters North America, said: “Nestle’s is directly impacted by the effects of climate change. Of particular concern are changes to weather patterns, water availability and agricultural productivity that will affect our global supply chain”.
And while many others will no doubt use the day to highlight their own sustainability plans and issue press releases – climate change is a challenge and not a business opportunity, and as such the developed world should not profit from disaster, according to India’s Environment Minister Prakash Javadekar.
Biggest Report Ever
Impeccable timing finds a newly-released report that details how sustainable production of bioenergy can be an important tool for addressing climate change.
Industry experts are calling the SCOPE Bioenergy & Sustainability Report the most comprehensive report on bioenergy ever released. It pulls together work from 137 researchers at 82 institutions in 24 countries that documents and analyzes impacts, benefits and constraints related to the global expansion of bioenergy.
It’s an age-old story of supply and demand… so on the eve of Record Store Day we’re bringing our record player out of storage, dusting off our favourite albums and learning why vinyl is here to stay…
In 2014 something extraordinary happened… UK album sales on vinyl climaxed at a 20-year high, following seven years of sustained growth (after even more years in the doldrums). Recently released figures from the Official Charts Company reveal that sales of vinyl LPs are continuing the trend in 2015– up a whole 69 per cent during the first quarter (compared to the same period in 2014).
Happily this has led to the creation of the Official Vinyl Albums Chart Top 40 and Official Vinyl Singles Chart Top 40 (combining sales of 7” and 12” singles) – musicians and retailers alike have welcomed the announcement with open arms, like UK vinyl retailer Phil Barton of Sister Ray Records, Soho, London:
“The resurgence in vinyl sales has been a great boost for the independent trade. The launch of the Official Vinyl Charts tells the world that a format that is loved and revered is more relevant now than ever – far from being a curiosity, vinyl is the go-to format for many music fans.”
So all signs are pointing to a resurgence of the once-beloved format, but do we have the infrastructure to keep up with the newfound surge in demand?
Back in Black (red, gold, green, and even white too…)
Vinyl LP sales stood at 1.4 million in 1995 (1.60 per cent of the UK album market) – in the years that followed sales dipped dramatically, finally reaching rock-bottom in 2007 with sales of just 205k (and a dismal market share of 0.10 per cent). With such a dismal performance it looked as though the beleaguered format had nowhere left to go – it was as good as dead…
But that hasn’t stopped those passionate and protective of the format from striving to restore the vinyl LP’s rightful place in our record collections – enter Record Store Day…
From its humble origins in the US, Record Store Day (or RSD for short) has since become a significant event in the musical calendar.
Megan Page , Communications and Marketing Assistant for the Entertainment Retailers Association, provides us with a potted history of Record Store Day and its origins.
“RSD is a celebration of the culture of independent record shops that aims to appeal not to just vinyl enthusiasts but also introduces a new generation to the joys of vinyl. Stores stock a range of exclusive product and host a range of events to celebrate.
“Record Store Day was conceived 9 years ago in the USA and was brought to the UK a year later. It’s now in its 8th year in the UK and co-ordinated by the Entertainment Retailers Association and Spencer Hickman. In 2014, over 220 independent record shops across the country signed up as labels produced over 270 exclusive album releases and 340 singles on vinyl. Now a global event, Record Store Day is celebrated in territories all over the world, including France, Germany, Netherlands and Spain.”
“…Watch the reverence they have as they handle their Beatles vinyl. How carefully they replace the albums into their sleeves, making sure they’re placed back onto the shelf in the proper sequence…”
Due to the complex logistics involved in such an initiative, orders are placed at the record factories as far back as December to ensure the production runs are completed in time. But park that thought for a bit, first we need to discuss vinyl’s phoenix-like rise from the flames…
I Am The Resurrection
During 2014 record sales hit a 20-year high – bolstered by the likes of Pink Floyd and Arctic Monkeys. But if we had to play Devil’s Advocate, is this all just a flash in the pan, a passing fad perhaps?
“It certainly helps having a big year of releases that would include Pink Floyd but from a personal point of view even the smallest of artists/fanbases can add their own mark on sales which keeps this trend continuing.”
Megan adds: “The growth of vinyl has been incredible and its sales figures reflect year on year growth. In 2014, vinyl album sales passed the 1million mark for the first time since the Britpop era. This is more than four times than the level as recently as 2008.”
We quizzed Martin on the factors that have contributed to vinyl’s return – what caused it to come back into fashion?
“Customers/consumers have always wanted something tangible and collectable. Vinyl is nice to look at, the artwork was really made for this format and you get a feeling of experiencing the record more.”
Earlier this year we also saw Neil Young weighing in on vinyl’s rise in popularity –Martin reckons that Neil Young had his own agenda to peddle here, commenting: “Very recently he’s launched a multi-million pound digital system (the PONO) that various people have already poked holes in, so that anything that deflects back onto vinyl helps his cause.”
We asked Megan whether there’s been a visible knock-on effect from such initiatives as RSD with record stores sales and vinyl releases?
“RSD itself has become such a popular initiative – sales of LPs alone last year generated more than £2m in retail for record stores. Because of its success, we are now seeing that not only heritage acts are releasing material on the format, but a new generation of artists such as Jake Bugg and the Arctic Monkeys are releasing music on vinyl. This also allows teenagers to discover the sound of vinyl of first time.”
Megan adds: “The great thing about the inclusion of bands like 1D and 5sos etc. is that for the first time it is recruiting a younger, female generation of music lovers to independent record shops who are discovering music on the vinyl format for the first time! Hopefully we’ll see more and more mainstream bands releasing material on vinyl too.”
Raging Against The Machine
Certainly on the strength of this you’d be forgiven for thinking that the future of the vinyl is as shiny as its glossy black exterior. However, it’s a different story behind the scenes, as aging factories are struggling to keep pace.
The Wall Street Journal reported that pressing plants (in the US) are being run flat-out to keep up with demand. And although there has been some investment in increasing capacity across Europe, more investment needs to be pumped into production facilities.
“The creaky machines that make them haven’t been manufactured for decades, and just one company supplies an estimated 90 per cent of the raw vinyl that the industry needs” – WSJ.
Chris Ruff, Marketing at Atlantic Records, thinks that there is a similar story in the UK: “Vinyl pressing time now is well over 8 weeks something that used to be almost half that. This is due to millions (literally) of repressing’s of classic albums.
“Depending on artist we usually do a pressing of 2k and then repress if any is needed. For reissues it is usually 5k… As a standard now for bands and indie acts we press all albums on vinyl.”
It’s not delays that have the potential to derail this creaky supply chain… The WSJ reports that record labels are sometimes waiting months for orders that used to be filled in mere weeks. In an effort to boost production, the machines are being run harder (and longer) than ever before, which is increasing the risk of break-downs – leaving record factories to foot hefty repair bills. The labour-intensive nature of the pressing process itself – the creation of the master record – all of these considerations pile on to the complicated, archaic procedure.
Chris sees the biggest obstacle will be trying to keep pressing in the UK (noting that Atlantic may look to Europe to press if they are quicker).
Such is the demand that factory owners are embarking on globetrotting voyages of discovery in order to procure scrapped presses. Paying anywhere in the region of £10-25k for the privilege – and that’s before adding the costs to transform them back into their previously (working) glory.
Placing increased pressure on plants when it comes to readying special (weird) releases. Limited runs of splatter, coloured, glow-in-the-dark, even scented vinyl means that invariably pressings take longer.
As a retailer Martin offers an alternative viewpoint when it comes to vinyl’s challenges:
“Pricing very much depends on how many of each album/single is pressed. This affects myself as retailer (the cost to me) and the customer (the cost to them). Moving forward we could certainly use more pressing plants in the world to ease delays!”
“I believe that the power of the record store to inspire is still alive and well, and that their importance to our next generation of musicians is crucial.” Dave Grohl – Foo Fighters frontman and ambassador of Record Store Day 2015