2014 a year to forget for McDonalds Japan

From the Great Fries Shortage to McNugget-Gate – 2014 was a tough procurement year for McDonalds Japan.

Food rationing, emergency airlifts, contaminated meat scandals and cultural insensitivities. It sounds more like a review of a military organisation’s supply chain operations than that of a global fast food giant. However, as hard as it is to believe, these events all occurred in the supply chain of McDonalds Japan in 2014.

Procurement’s Butterfly Effect

The inherent relationship between external market forces and procurement performance was once again exemplified over the December holiday period as McDonald’s Japanese supply chain descended into crisis.

The issue began on the US west coast where 20,000 dockworkers have been locked in protracted contract negotiations since July of last year. Operators at the affected Pacific Coast ports have accused the dockworkers of deliberately slowing work in order to impact the turnaround times of ships.

In keeping with butterfly effect, this lethargy at the ports sent waves across the Pacific, waves that crashed into the supply chain of McDonalds Japan.

Delays at the ports caused shipping times for US produced french fries, destined for Japan, to stretch from two weeks out to more than four. This slippage caused a major shortage of the popular side dish in Japan, a country that imports more $330M USD of American potato products a year.

The sheer volume of potatoes required to services Japan’s insatiable appetite for fast food, combined with McDonald’s complex internal procurement arrangements, meant it was difficult for the company to quickly find alternative suppliers to cover this shortcoming.

The magnitude and impact of this series of events only becomes apparent when you consider that McDonalds Japan sources 100 per cent of its fries from the US.

By mid-December the impact of the delayed shipments started to be felt at McDonalds outlets across Japan with the New York Times announcing that the country had “entered the great French fry shortage of 2014”.

Drastic Times Call for Drastic Measures

In a move normally reserved for times of war or natural disaster, McDonald’s was forced to implement a rationing strategy to manage the distribution of its dwindling supply of fries.

In order to avoid “running out of fries” during the December/January holiday period, customers at McDonald’s 3135 Japanese outlets were limited to only small serves of French fries.

A note on the company’s website stated:

“Because we are currently having difficulty stably procuring McDonald’s French fries, we are offering them in the small size only,”

To sure up supply, McDonald’s took the drastic step of airlifting 1,000 tones of frozen processed potatoes into Japan. The firm has also established a longer-term solution that sees shipments of fries being dispatched from US east coast while the west coast labour discussions continue.

Fortunately for the fans of the golden arches, these measures enabled McDonald’s outlets in Japan to once again offer all three sizes of fries from January 5 onwards, signalling the end of a three-week period of rationing.

2014 a year to forget for McDonalds Japan

The Christmas fries shortage has rounded out a terrible year for the firm’s Japanese procurement operations. In July the organization faced an even more serious supply chain issue when it was found that expired meat (procured from Chinese supplier Shanghai Husi Food) had found its way into the production of the company’s popular Chicken McNugget product.

Despite the best efforts of one Kanagawa Prefecture store manager, who told his staff to bow more deeply than usual to customers who bought chicken products, concerns over the safety of McDonald’s food led to a 17.4 per cent drop in same-store sales during the month of July. Similar drops in sales were recorded for the proceeding months.

The crisis could have been better managed

The way the in which ‘McNugget-Gate’ (as it was so dubbed) was handled by management at McDonald’s has also drawn stern criticism in Japan. The President of FamilyMart, a leading convenience store in Japan that also held contracts with the disgraced Chinese supplier, made an apology to customers immediately after the contaminated meat story broke.

An apology from McDonalds President and CEO, Sarah Casanova, was not received until a week after the story broke and even then, was only delivered in response to a question posed at a scheduled earnings announcement.

 

Casanova was further criticized and accused of being insensitive to Japanese corporate practices when she portrayed her firm as a victim of the crisis rather than taking responsibility for the errors that had occurred in her company’s supply chain.

Brand and bottom line both take a hit

As well as impacting the firm’s brand image in Japan, it appears 2014’s supply chain slip ups will have a marked and lasting impact on the company’s financial performance.

On December 8th (prior to the rationing program) the company released a statement claiming Asia/Pacific, Middle East and Africa sales were again down for the month of November, directly referencing “the ongoing impact of the supplier issue on performance in Japan and China”.

What can we learn from all this?

From a procurement point of view, there is a great deal to take away from McDonald’s recent shortcomings. The impact that external market forces can have on a procurement team’s ability to secure supply, the risk of overreliance on single geographies and the fact that a company’s image can be tainted (pun intended) by the actions of its suppliers jump immediately to mind.

Fortunately for Japanese french fry fans, the rationing is now over, Big Macs will once again be accompanied by a sufficient supply of American fried potatoes and fast food dining in Japan can return to normal.

I bet the McDonalds procurement team is hoping for the same.

Does procurement have a role to play in cyber security?

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

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

How big a worry is this?

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

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

Procurement’s Role

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

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

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

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

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

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

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

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

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

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

Supply Chain woes help doom Target in Canada

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

Read more on CFO

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

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

Read more at Business Insider

Yusen Logistics expands Sydney operations

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

Read more at Supply Chain Digital

Jailed Military procurement official blackmailed

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

Read more at Greek Reporter

Thailand drafts public procurement law following UNDP review

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

Read more on Supply Management

What’s got you motivated in 2015?

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

Eugene Onischenko/Shutterstock.com

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

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

What’s got you motivated in 2015?

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

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

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

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

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

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

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

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

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

Top answers from the community included:

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

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

Other things the community suggested included:

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

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

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

Hope that helps, Zach! And good luck!

Helpful links

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

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

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

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

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

What are the biggest global challenges in 2015?

WEF summit to look for answers to major global challenges.

Water crises, interstate conflict and climate change number among the top risks that the world will face over the next twelve months. This is according to the Global Risks 2015 report that the World Economic Forum has readied ahead of its summit on 20 Jan.

Emerging technologies were also cited in the forward-looking document, an area that’s come under considerable scrutiny of late owing to the numerous cyber attacks (hacks) made against major organisations.

The report was put together (in part) by Marsh & McLennan Companies – a representative commented: “As a company you are not protected [against cyber attacks] unless your supply chain is protected.” 

We’ve compiled a collection of tweets around the highlighted issues (as well as some educated guesses) that are all expected to come out of the 2015 discussions.


5 minutes on Procurious – a primer for new members

Following on from our call to step up your networking game, we’ve published a quick, digestible guide to spending five minutes on our network.

Five minutes on Procurious

If your Community Feed is looking a bit empty, then that big green ‘Build your Network’ button (1) is your friend…  We’ve waxed lyrical on the benefits of this tool in the past, see here. Invite your LinkedIn contacts, send a personalized email link, or use the filters to select members by country/industry/category.

For instant gratification, can we instead draw your attention to ‘Get Connected’ (2). This presents a selection of Procurious members we think you should connect with. Click ‘View more’ when you’ve exhausted the recommendations.

Got something you want to get off your chest? Post a status update (just like you do on LinkedIn/Facebook, or send a Tweet on Twitter) to your Community Feed. Just start typing at the ‘Share your thoughts’ prompt (3). Don’t feel like you need to be restricted to text either. Feel free to post a fun/informative/thoughtful photo, or upload a document that you’d like to share with the rest of your network.

Posted a status? Great! Hopefully other Procurious members will take a shine to it and comment (4). Try it yourself by leaving a comment on a post in your network.

Remember, you can tag other Procurious members in comments and statuses by prefixing with the @ symbol.

If commenting on statuses isn’t enough for you then look to ‘Latest discussions’ (5). Here you’ll see a list of the most recently submitted discussion topics that Procurious members have posed.

Click into the topic to answer and air your thoughts. You can also elect to follow discussion topics, and share them to your Community Feed if you so wish.

See something in your Community Feed that you like? Click the thumbs-up to give it your seal of approval (6), or click the share icon to repost to your network.

The Oil Crisis for Dummies

I’m sure like me, most of you have watched with interest the price of oil plummet from well over $100 a barrel to below $50 a barrel in the space of just a few months. I’m quite sure that, like me, most of you have been in the dark as to why this is the case.  So I thought I’d do some research into the matter and try to uncover what is driving this price collapse, and what it means for you as an individual as well as a procurement professional.

While fluctuations in the price of oil are not particularly rare, ones as significant and unpredicted as this certainly are.  We’re talking about the largest fall in the price of oil ever, and one that, even as it was beginning, was discarded by most analysts as a small correction ahead of yet another uptick. Even when the price of oil was in the 80’s in October, analysts at Barclays noted, “It seems extremely unlikely that oil prices will remain below $100 for very long.”

So why has everybody been so wrong about predicting the price of oil, and why has it continued to fall while most analysts have continued to remain bullish on the price of Brent (the global oil benchmark)? If there’s one short answer to this – it’s OPEC – but more on that later. Instead we’ll begin by looking at two strong causes behind the slump.

Cause Number 1: US Oil Production

With rapid advances in drilling technology (particularly in extracting from shale), oil production in the US has increased by more than 50 percent in the last 2 years.  For anyone who’s done Year 7 economics, you’ll know that when supply increases and demand remains steady, prices come down.

US Crude Oil & Natural Gas Production 1970-2015
US Crude Oil & Natural Gas Production 1970-2015

Cause Number 2: A lack of intervention from OPEC.

Traditionally, when there’s a slump in the price of Brent, OPEC (Organisation of Petroleum Exporting Countries – fundamentally an oil cartel) bands together to cut supply and therefore prop up the price of oil.  In this case, for whatever reason, they decided not to step in.

The technological advances that I mentioned earlier don’t come without a cost, so by deciding to let things play out, OPEC basically condemned a lot of new shale explorers to bankruptcy, as their production cost per barrel sits at anywhere between $50-$70.  With the Brent Crude Oil rate sitting below this, it has become no longer financially viable for these ventures to continue exploring and drilling new wells . 

Production Cost Per Barrel of Major Oil Producers in 2020
Production Cost Per Barrel of Major Oil Producers in 2020

Why hasn’t OPEC stepped in?

Well basically they’re driving all of this new shale competition out of the market.  This reduces total global oil production temporarily, and when they’ve effectively bankrupted all the new kids on the block, OPEC can start manipulating the price back up to historical levels.

How long until they decide to intervene?  Suhail al-Mazrouei, The UAE’s Energy Minister, said a few weeks ago that OPEC would wait “at least three months before considering an emergency meeting”.  Good news – you can expect some very cheap petrol at the pump for at least the next few months. (You might even get some cheap flights in too, although the aviation industry strongly hedges their AVGAS purchases, so it might just be a pipedream)

So what does this mean for you?

I’m going to come at this very simplistically and from the point of view of someone in a developed country. It’s a good thing.  Consumer spending accounts for approximately 60 percent of GDP in most western countries, and cheap oil means two things.  First of all, you’ll have more disposable income as a result of a decreased cost of transportation – and secondly you can buy more with this disposable income, as the cost of goods is likely to fall. On the other hand, if you live in a country that is heavily reliant on oil production, like Russia or Venezuela, it’s not good news.

As a Procurement & Supply Chain professional, I won’t go out on a limb and give you an unequivocal answer as to the impact this will have on your job – I’m certainly not qualified enough to answer this – but I think some of the articles mentioned in this Procurious post might give you a good idea.

I hope this gives you a better understanding of the situation, and if you have any comments or thoughts on the matter (or if you think I’ve got it completely wrong) please comment below!

7 gadgets to help improve your sleep

Suffering from back to work blues?

Whether you’re putting on that extra layer to protect from the cold or basking in altogether warmer climes, January’s unlikely to ever win any accolades for favourite month of the year…

To that end we’re providing you with a few good excuses to hide away and snuggle down for that little bit longer each morning. Eyes down for a selection of bizarre gadgets that will do everything from analysing your sleeping patterns to guaranteeing a good night’s sleep.

Sleep Number x12 bed

Sleep Number x12 bed

If someone were to remark that they thought your bed was pretty clever, you’d probably wonder whether they’d been getting enough sleep themselves… But you’d be forgetting that we live in an age where just about everything has become ‘smart’ – that’s right, even beds are getting in on the act.

US bed maker Sleep Number has gone and made the world’s first smart bed. The built-in Sleep IQ technology tracks the usual measurements (heart rate, breathing rate etc.) but also responds to voice commands to easily activate a wealth of other features. The x12 bed is also dual-sided and it (for example) allows you to make minute adjustments to alleviate a noisy snoring bedfellow.

At $8000 it certainly isn’t cheap, but with all that gadgetry onboard we’re sure you’ll enjoy a jolly nice sleep.

Clocky robotic alarm

Clocky Robotic Alarm

This little wonderful wheeled alarm clock started life as an engineering student’s project. Having trouble waking up herself, Gauri Nanda developed Clocky to shriek annoyingly and effectively, waking you up. The fun doesn’t end there though, Clocky will leap off your bedside table (without a thought for its own safety), and drive around your room, all the while performing random turns to whizz away from your grasp. There’s only one thing for it, you’ll have to get out of bed and hunt the little blighter down yourself.

Ostrich Pillow - sleep gadgets

Ostrich Pillow

“What is that silly thing around your head?” Enquires a bemused work colleague. “Why it’s only a revolutionary new product to enable easy power naps anytime, everywhere” you answer, Right, of course it is.

The Ostrich Pillow really can be used anywhere – be it airports, trains, aeroplanes, libraries, at the office, on a sofa and even on the floor. Heck we know it looks silly but its creators have been beavering away on the Ostrich Pillow for one year, testing and exploring the perfect dimensions and materials to create the best possible experience for the nap.

Selk'bag

Selk’bag

The strangely-named Selk’bag looks like a giant onesie, and has clearly been designed for those adults among us who just refuse to grow up (that makes most of us then).

It’s based on the Japanese Snuggie (which resembled a giant mutant tadpole) and amusingly became the stuff of Internet-lore back in 2009. Perfect for a variety of adventures, the Selk’bag is used by outdoor enthusiasts the world over for camping in a tent, under the stars, at the lake, on the beach, or log cabin (just don’t go scaring others in the woods…)

shapeup alarm clock

Shape Up Alarm Clock

It’s hard enough to get up in the morning and the Shape Up Alarm Clock (shaped like a dumbbell) is set to make things that little bit harder… OK so it’s a bit of a challenge, but you’ll look buff.

This is a digital alarm clock and dumbbell all wrapped up into one novelty alarm clock package. Set the digital alarm clock as normal using the friendly buttons and then wait for your wakeup call with a twist. Only the upward swing of the dumbbell shuts off the repeating buzz – 30 upward swings of the dumbbell that is – meanwhile you can watch your progress using the LCD display.

Sleep Recorder app for Windows Phone

Sleep Recorder App (for Windows Phone)

Prone to talking in your sleep? If you’ve ever wondered what you (or a loved one) sounds like then download the excellent Sleep Recorder app and see for yourself. Sleep Recorder uses your phone’s microphone to capture audio and saves the recording if it detects voice. It won’t record silence or noise. Editor’s tip: keep your phone plugged-in overnight to ease battery drain while in-use.

Sound Oasis Sleep Therapy Pillow

Sound Oasis Sleep Therapy Pillow

This unique pillow allows the weary to enjoy their favourite music or sounds in optimal relaxation and comfort. Audio is delivered via two high fidelity, ultra-thin stereo speakers positioned deep within the pillow, there is also an in-line volume control so you don’t need to faff around when turning the pillow up or down.

What’s more the pillow is finished with a soft brushed cover and hypoallergenic polyester fibrefill.

Do you have the soft skills to deliver on strategies?

Today we’re talking about soft skills.  We are all aware of the need for us all to be technically proficient at what we do, however more and more the drive for us is to drive and build relationships, indeed it’s often cited as one of the most important aspects of what we do.

A recent Deloitte CPO survey identified that globally 57 per cent of CPOs consider that their teams do not have the required skills to deliver on the strategies. Potentially this is because of the lack of the relationship and soft skills that are required to make connections with individuals.

The Faculty’s recent research on procurement capability discusses the increasing need for soft skills within procurement: “As the category management process matures, procurement leaders are shifting their focus from core concerns (cost, delivery, quality and compliance) to supplier relationship management. There is a recognition that effective relationship management has the potential to improve performance in all of these areas and drive supplier innovation and value.” Stay tuned for more articles on The Faculty’s research findings around procurement capability and soft skill development.

Your grandmother may have always told you that you never get a second chance to make a good impression, well the writers at Harvard Business Review beg to differ. BTW the “Gordon” the article refers to is not me!

In this article they suggest that when people view others they do through a series of lenses, these are trust, power, and ego.

  • The trust lens is employed when people want to figure out if you are friend or foe. Perceivers answer that question by tuning in to two particular aspects of your character: your warmth (your expression of friendliness, respect, and empathy), which suggests that you have good intentions, and your competence (evidence that you are intelligent, skilled, and effective), which shows that you can act on your intentions.
  • To get someone to see you accurately through her trust lens, project warmth and competence
  • The power lens comes into play when there is a disparity of power, especially when the perceiver has more than you do. He or she gazes through this lens to assess your instrumentality: “Prove yourself useful to me, or get out of my way.”
  • To create the right impression in your perceiver’s power lens, be sure to demonstrate your instrumentality at every reasonable opportunity.
  • The ego lens gives the perceiver a sense of who’s on top. Subconsciously, people often want confirmation that they, or their group, are superior to other individuals or groups.
  • To be seen positively through the ego lens, be modest and inclusive. Go out of your way to affirm the strengths of others, and try to create a sense of “us,” so that your perceiver can celebrate your achievements rather than feel threatened by them

If you started off on the wrong foot and need to overcome a bad impression, the evidence will have to be plentiful and attention-getting in order to activate phase two thinking. Keep piling it on until your perceiver can no longer tune it out, and make sure that the information you’re presenting is clearly inconsistent with the existing ideas about you.

A common theme we hear is to try and influence senior leaders within the business about the value of procurement or a specific strategy. A recent podcast I was listening to discussed the importance of getting the boss to buy in. There is a written piece to accompany this too.

The piece discusses that most managers struggle to sell their ideas to people at the top. They find it difficult to raise issues to a “strategic” level early in the decision-making process—if they gain entry into such conversations at all. Studies show that senior executives dismiss good ideas from below far too often, largely for this reason: If they don’t already perceive an idea’s relevance to organizational performance, they don’t deem it important enough to merit their attention. Middle managers have to work to alter that perception.

The piece highlights and expands on key tactics, these include tailoring your pitch, framing the issue, managing emotions on both sides, getting the timing right, involving others, adhering to norms, and suggesting solutions.

Let’s take a closer at involving others – while seeking input from multiple individuals can aid decision making, it can also fail as we select the wrong team members. The following piece from Harvard Business Review is all about avoiding this and how to make under-performing teams actually deliver what was desired.

The main issues that go wrong in groups are:

  • Groups do not merely fail to correct the errors of their members; they amplify them.
  • They fall victim to cascade effects, as group members follow the statements and actions of those who spoke or acted first.
  • They become polarised, taking up positions more extreme than those they held before deliberations.
  • They focus on what everybody knows already—and thus don’t take into account critical information that only one or a few people have.

The report goes on to suggest ways to make groups work better:

  • Silence the leader
  • “Prime” critical thinking.
  • Reward group success.
  • Assign roles.
  • Establish contrarian teams.

As ever you can subscribe directly to the sources I have identified here (nothing is my copyright), and if you wanted to discuss please feel free to contact me via Procurious, or follow me on Twitter.

Article by Gordon Donovan

How falling oil prices are impacting Procurement and Supply Chain

How falling oil prices are impacting Procurement and Supply Chain

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

Why is this happening?

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

Personal vs. Professional

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

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

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

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

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

What can we do?  

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

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

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

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

How sloppy security exposed Apple’s supply chain secrets

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

Read more at Cult of Mac

Self-driving trucks to revolutionize logistics

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

Read more at Supply Chain 24/7

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

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

Read more at Birmingham Post

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

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

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

Are we falling out of love with the PQQ?

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

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

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

Don’t bin the PQQ just yet

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

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

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

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

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

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

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

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

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

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

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