Tag Archives: supply chain management

One Year On: Has Grenfell Changed Procurement?

How can procurement professionals learn from the tragic events at Grenfell tower in June 2017? 

Sasa Wick / Shutterstock.com

It’s just over a year on from the Grenfell Tower fire, which claimed the lives of 72 people and marked the UK’s worst residential fire since World War Two.

With the Grenfell Tower Inquiry ongoing; there are still so many unanswered questions regarding the circumstances of the fire. And for those directly impacted by the events, the trauma experienced is still very present.

As several victims and commentators have pointed out; those who lost their lives should not be allowed to die in vain. There are opportunities to learn, to improve policies and to ensure that the mistakes that were made will never be made again. Procurement should be at the forefront of these changes.

Last month, Claire Curtis-Thomas, British Board of Agrément chief executive, spoke at a select committee hearing on Dame Hackitt’s review of Building Regulations. She labelled the procurement process a “fundamental problem” that has led companies to become “complicit in poor outcomes”.

Has Grenfell changed procurement?

Alan Heron, director of procurement at Places for People (PfP), is one who believes the landscape has now changed for procurement. “It took something as horrible as Grenfell for people to realise there’s a consequence to looking for the lowest price,” he asserts. “It’s refocused everyone away from ticket price and back to value, which is where it should have been all along.”

A recent report conducted by Fusion21 investigates how procurement professionals working in the housing sector are reacting and adapting to the tragedy.

Throughout April and May 2018  Fusion21 surveyed 80 procurement professionals working for organisations that
collectively own more than a million homes.

The results suggest that social landlords are placing a much greater emphasis on quality when making procurement decisions following the fire.

  • 50 per cent of respondents said the Grenfell Tower fire has meant their organisation now places greater emphasis on quality when making procurement decisions. Among those who said Grenfell had not affected their organisation’s approach, were many who stated that quality was already vital
  • These professionals stated that there is now a greater focus on quality especially in relation to fire safety, and ensuring contractors had completely up-to-date information
  •  75 per cent of procurement professionals described compliance as “extremely important” when achieving value for money

Sarah Rothwell, Head of Member Engagement at Fusion21 explained “we conducted our Procurement Trends research in order to find out what was most important to procurement professionals after a hugely challenging couple of years for everyone in the housing sector.

“It will surprise no-one that, in the wake of the Grenfell Tower tragedy, the work of procurement teams around compliance hasbeen the focus of renewed scrutiny. The research findings [confirm this].”
Concerningly, 55 per cent of respondents admitted to feeling  some pressure to procure at the lowest price and one respondent, wished Grenfell had altered the emphasis their organisation placed on quality.
In other procurement news this week…

EU warns the US and China against a trade war

  • US president Donald Trump, Russian president Vladimir Putin and China have been urged to work with Europe to avoid trade wars and prevent “conflict and chaos”
  • Last week, European Council president, Donald Tusk, lambasted the US president’s constant criticism of European allies and urged him to remember who his friends are when he meets Mr Putin
  • He said that Europe, China, the US and Russia had a “common duty” not to destroy the global order but to improve it by reforming international trade rules

Read more on The Independent

Could automation increase modern slavery?

  • In its annual Human Rights Outlook, Verisk Maplecroft warned “drastic” job losses caused by robot manufacturing were predicted to cause “a spike in slavery and labour abuses” over the next 20 years
  • It said more than half of jobs across the ASEAN-5 countries of Vietnam, Cambodia, Indonesia, Philippines and Thailand could be lost to automation, which could push already at-risk supply chain workers into forced labour
  • Women are likely to be disproportionately affected because of their high representation in the garment, textile and footwear industry, an area that is particularly at risk of automation, the report said

Read more on Supply Management 

Brexit puts food supply chains at risk

  • Perishable goods are particularly at risk when supply chains are delayed, and U.K. and EU food producers are on edge as the clock ticks down toward March 29, 2019
  • Earlier this year, food suppliers and manufacturers signed onto a manifesto advocating for frictionless trade and innovation-focused regulation
  • If, post-Brexit, enhanced border controls and regulatory checks are implemented between  nations, delays and even failed deliveries could result
  • With negotiations in flux, many U.K. and EU businesses have taken matters into their own hands. Several European companies are planning to relocate parts of their supply chain out of the U.K. About one-third of U.K. businesses with EU suppliers plan to replace them with British vendors

Read more on Supply Chain Dive

Eight Critical Actions for Managing Your Supplier Pool

Establishing a pool of preferred or pre-qualified suppliers is  a great idea as long as you are actively managing your supplier pool.  Here’s how it’s done…

Last year Government Technology published an article describing how the state of Colorado has turned to a process they call “mini-RFP’s” to streamline and expedite procurement in their IT category.

The author Jessica Mulholland reports the state performed a prequalification of vendors and awarded multiple contracts to address a “specific set of issues and implementations”.

This select group of vendors operating under pre-negotiated legal terms are solicited when new work comes up.  The lowest bidder is awarded leveraging their prenegotiated terms and conditions.

This is a concept that I have seen quite a few times before.  Many private organisations operate in this manner.  Essentially awarding MSA’s that include no rates or commercial terms, just legal terms.

It should be noted that the reason this is more expeditious is because it streamlines the contracting portion of the procurement process.  This isn’t a shortcut to procurement, you still need a scope of work, you still need a bid period, and you still need analysis.  The time saved is the time with legal.

Prequalification of suppliers isn’t anything new, but it is a unique approach in public procurement.  I’m no expert on the legality of this as a government practice, but I will address this from a private business perspective.

1.Agreements without Commercial Rates

Perhaps this is a nuance of the public sector and possibly the reason why the state of Colorado can have a closed bid, but in private business there is simply no good reason to have an MSA without pre-negotiated rates.  Nonetheless, I have seen this quite a few times.  If you are going to go so far as to negotiate legal terms, locking in rates and commercial terms should be a no-brainer.

2. Obstacles to inclusion

If you plan to add a pre-qualification process to your organisation, consider keeping the process simple and straight-forward.  It should not take more than a couple of weeks to complete the process.  Anything more than that and you may find that your process becomes an obstacle for inclusion.

3. Scale the Pool

Be sure to have a large enough pool to allow for multiple projects to occur at the same time without depleting your bench.  There is nothing worse than having an emergency project when all of your pre-qualified vendors are at capacity and you have no one left to award.

4. Diversify your Pool

Your pool of pre-qualified suppliers should be as diverse as the projects you contract.  When I talk of diversity here, I’m not speaking of minority owned businesses.  That is important too, but more than that you need to make sure your pool of vendors has large firms for the big projects as well as small firms for the small projects.  Don’t just include all the big guys or you may find you have no one at all.

5. Score Performance

If you are going to establish a pool of pre-qualified suppliers it’s important to score each performance.  Develop Key Performance Indicators (KPI) to evaluate how the suppliers performed and make sure to collect a report for each engagement.  This will give you actionable data to evaluate the performance of each supplier.

6. Aggregate and Report KPI’s

Grading the suppliers on each project is essential, but when you collect and aggregate that data across a year, now you have powerful data.  Anyone can have a bad project, but with a consolidated view of a vendors performance over a year, you can address specific problems, identify weaknesses, and generally grade each supplier objectively. With this data, you can elevate suppliers that perform well and downgrade those who perform poorly.

7. Evaluate your Pool at Least Once per Year

With your performance data in hand, you should meet with your suppliers annually and share the results of your scoring.  This may be a difficult conversation, but if you are basing your comments on facts, it will be easier.  In addition to reviewing existing suppliers, this is the time to look outside of your pool to identify new or up-and-coming suppliers to add.  You should also evaluate the state of your organisation to right-size your pool.

8. Update your Agreements

Above all else, don’t let agreement expire.  Track the end of all agreements and create reminders on your calendar to ensure you are proactively renewing, terminating, or renegotiating agreements before they expire.

Establishing a pool of preferred or pre-qualified suppliers is  a great idea as long as you are actively managing your supplier pool.  Keep on top of your contracts and you will soon see the fruits of your labor.

Do you have prenegotiated or prequalified Suppliers in your organisation?  If so, do you follow these recommendations?  Are there any best practices you recommend?  Tell me your stories.


This article was originally published on Luis Gile’s website. Check out more of his content here. 

Sign up for today’s webinar: Clean Up Your Act! Category Management AI-Style. 

How To Upgrade Your Procurement Mindset

In a world where cost-savings are no longer king in procurement, how can the function demonstrate its business value and earn a seat at the table? Jaime Mora talks upgrading your procurement mindset!

In recent years, our organisations have gotten a better understanding of the valuable contribution Procurement can deliver to the business.

And yet, there remains a feeling that the function has not yet reached its full potential. Procurement is certainly a relevant and appreciated corporate function. But we’re not yet sitting in the C-Suite…

As procurement professionals, we unanimously agree that the function should be elevated within the business, but convincing those at the top is easier said that done.  Whilst all organisations consider implementing cost-savings to be a crucial part of business success, it’s no longer regarded as a strategic process or a competitive advantage. Leaders are becoming increasingly aware that savings alone will not distinguish them against  their competitors. As such, procurement can be dismissed within the business as a less important function.

The bottom-up approach

If traditional procurement contributions are not at the top of an organisation’s agenda, how can procurement earn its place in the C-Suite?

It’s difficult to find a “one size fits all” recipe but we could start by upgrading our procurement mindset. I propose that we rebrand  ourselves as: “External Competitive Advantage Strategists.”

But what on earth does that mean?

As it stands, we’re  pressured into taking a bottom-up approach to our work. We know we have to bring savings to the table, we achieve this, and only then do we start thinking about the other nice things we can do with our time; innovation, sustainability, supplier development etc. And we deliver on those things too.

It makes sense that the more value-adding contributions we make, the more arguments we have to justify a spot, and a voice, at the highest levels of the organisation.

But in reality,  we end up doing bits and pieces here and there, following trends and simply trusting our gut.

Taking this approach is one of the reasons that procurement objectives and output may deviate from actual business goals.

Taking a top-to-bottom approach

If we truly want to step up our contributions, we should be taking a top-to-bottom approach. Our organisations operate in highly competitive environments, where sustainable advantages are required in order for us to outperform our competitors.

Procurement is uniquely positioned in the business given our access to so much information from our supply networks and an awareness of the opportunities here. We’re in the perfect position to source more than just products and services – we can actually source competitive advantage.

Procurement is capable of seeing things strategically. We can analyse where our organisation stands in a competitive environment and we are capable of both meeting our business targets and identifying where and how our organisation could compete better.  To take a holistic approach, this should be complemented with strategic analyses of our suppliers.

As I mentioned at the beginning of this piece,  cost-savings will always be appreciated. But procurement’s work should never be limited to that. The new approach to procurement is about sourcing the external competitive advantages on offer to give our organisation unique advantages in a competitive environment.

Imagine the following scenario: one of my organisation’s strategies is to develop its people. From my knowledge of the supply market I know a particular supplier that is uniquely skilled in people management and development and this makes them the most competitive supplier. We have the power to bring this supplier to the table; to initiate the discussion to build a partnership and leverage the supplier’s competitive advantage, or even a vertical integration.  Boom! Now Procurement is sitting at the M&A table.

As saving becomes a commodity and not a priority, it is time to reinvent procurement. Leave the Procurement Manager title behind and become a External Competitive Advantage Strategist!

4 Ways Procurement Could Better Manage Risk

Procurement pros need to get better at managing risk. Because supply chain disruption can come from any angle, whether it’s caused by a supplier site failure, environmental or geopolitical factors, or even adverse weather… 

If it’s not already, risk management should be a top priority for businesses. The consequences from not actively identifying, managing and mitigating supply chain risk can significantly impact an organisation’s profitability, not to mention brand reputation and potentially, its sheer existence.

riskmethods set out to determine the current “state of risk management and mitigation” in today’s global business ecosystem by surveying more than 250 senior procurement executives from across the globe. The study unveiled important findings around how prepared procurement leaders are to tackle rapidly evolving business environments brought on by new, more complex threats, and the current methodologies employed to manage risk in the supply chain. Here are four areas the survey explored, which indicate where procurement teams are failing in terms of risk management.

  1. Preventing disruption

All senior procurement professionals identify ‘avoiding significant disruption to the supply chain’ as a top priority, but when survey respondents were asked whether their organisation had a significant disruption in the past 12 months, more than 47 per cent indicated that they had experienced between one and five.

Additionally, a surprisingly high 13 percent indicated that they had 20 or more significant disruptions in the past year. Arguably the most alarming statistic – 12 per cent of respondents did not even know whether there were any serious disruptions to their supply chain during this time.

This is a testament to the 12 per cent’s minimal visibility into their operations. According to this data, nearly all organisations faced a disruption in the past year, speaking to the prevalence and nature of supply chain threats at they continue to increase. 

  1. Improve ability to uncover risks

The current landscape has made it critical for procurement professionals to have real-time, thorough views into potential risk and their impacts to make well-informed purchasing decisions. Many organisations have implemented some form of tracking mechanism for risks, but how often the data is updated is another issue.

When we asked respondents about the frequency in which data is refreshed, less than one third of respondents answered continuously. This is an alarming percentage.

Risk monitoring in today’s digital business environment needs to be a 24/7/365 task. Organisations that aren’t receiving continuous updates are falling behind and can’t possibly be making the best decisions for their business.

The underlying cause of this lack of complete information is usually associated with traditionally highly manual processes. Not only is the manual approach an extremely tedious and time-consuming task, it also takes away resources from other critical objectives. Most importantly, it severely limits big-picture insights and increases the chances of a serious supply chain disruption. When survey respondents were asked what level of automation their organisation employed to refresh critical information, less than one per cent of respondents indicated that it is completely automated.

An additional 39 per cent indicated that they were in the low to moderate rage of automation, relying heavily on manual tools such as Excel in conjunction with some outside sources. A full quarter of respondents indicated that they have no automation capabilities at all and are completely reliant upon manual search.

  1. Supplier risk impact assessments are key

Understanding a supplier’s potential impact on the business is key for procurement teams when it comes making purchasing decisions. For example, if a major supplier gets hit by a severe weather event which causes a delay in shipping, that could cause a ripple effect that halts production and eventually leads to a loss in revenue.

When survey participants were asked if their organisation had a mechanism in place for measuring the impact a supplier has on the business, almost half said that their organisation had no structured assessment of supplier criticality or impact.

Having no such assessment means organisations are at times putting their fate in the control of someone’s best guess. Organisations must have clear visibility into their supply chain, including which suppliers have the greatest potential impact, so they can refocus resources on reducing risk and preparing for a crisis.

  1. Organisations must be better equipped to mitigate emerging threats

While being able to identify potential risk is a crucial procurement workflow, having the ability to act on that information and mitigate evolving threats is equally, if not more, important.

Only slightly more than 20 per cent of study respondents indicated they have plans in place. An additional 27 per cent indicated that no such plans exist and 53 per cent indicated that there were only partial plans in place. These numbers demonstrate how difficult it is to evolve into a mature organisation when it comes to prioritising risk because businesses lack the necessary level of stakeholder collaboration.

Supply chains will never be free of risks, but an organisation’s ability to prepare for, identify and mitigate emerging threats will set them apart from the competition. Procurement teams can’t possibly make well-informed business decisions without a risk management strategy in place. As the number of risks continues to increase in this environment, the need for accurate, actionable insights will only become more critical.

When it comes to risk management, companies need to consistently be moving forward as the current threats will only continue to evolve.

Download the report: Procuring Risk: The State of Risk Management and Mitigation in Today’s Global Supply Chain to read riskmethods’ full findings.

Sorry Kids: Easter Chocolate To Be Cancelled After 2050

The world is running out of chocolate… And if procurement pros can’t find a way to save the day, no one can! 

Most of us like to indulge in a little (or a lot of!) chocolate over Easter.

In Britain alone, the projected Easter spend for 2018 is $892.6 million.

And in the US, 2018 Easter spending is expected to total a whopping $18.2 billion.

But, depending on how attached you are to your Creme Eggs, Lindt Gold Bunnies or your Waitrose chocolate avocados , you might need to stockpiling now; in preparation for a very uncertain future!

Why climate change is claiming our chocolate?

More than 50 per cent of the world’s cocoa comes from West African countries, primarily Côte d’Ivoire and Ghana, whose climates have traditionally best-accommodated the cacao tree.

But,  in recent years, drying conditions, long draughts and rising temperatures, are making it harder to grow cocoa beans.

Warmer, dryer climates “will suck moisture from the soil and make it impossible to produce a good crop in many regions around the world.”

In short, climate change could destroy the chocolate industry within 30- 50 years.

What can procurement professionals do?

All is not lost! Procurement teams around the world are already investing in alternative, and more sustainable options, for their cocoa sourcing.

  • Developing a sturdier cacao plant

Last year, Mars unveiled their Sustainable in Generation Plan stating:

“We’ll invest $1 billion over the next few years to tackle urgent threats facing our business and the society we operate in – threats like climate change, poverty in our value chain and a scarcity of resources.”

Part of that investment will go towards “recruiting University of California researchers to develop a sturdier cacao plant that won’t wilt in drier climates.”

  • Changing farming approach

The majority of farms in Côte d’Ivoire and Ghana are run by poorer families who cannot afford fertilisers and pesticides. If modern farming techniques were made available to the farmers in Western Africa; cocoa production might be easier.

The Rainforest Alliance is working with smallholder cocoa farmers to manage climate change and protect their livelihoods and way of life.

  • Relocating suppliers

Farmers in Western Africa have the option to move their crops to higher ground; but there is limited space and many upland areas are protected for wildlife.

Organisations could look to source their cocoa beans from a different region entirely.

Dr Barry  Kitchen, executive chairman of Daintree Estates, told the New Daily that “Cairns generally had ‘ideal’ conditions for cocoa trees, which need consistent rain, warm temperatures, and shade with dappled light.”

“You’ve got to be continually innovative and continually looking at ways that you’re preparing yourself for the future.” he said.

But, given the much higher labour costs in Australia, it’s unlikely that the industry could ever migrate to Australia.

  • Changing the nature of chocolate

Research by The Conversation suggests wild mango butter, made from the fruit’s stone, has a very similar chemical, physical and thermal profile to cocoa butter.

If procurement teams decide to invest in the science behind it,  it mightn’t be too long before we’re eating mango butter Easter eggs.

Personally, Procurious thinks it’s an egg-cellent idea!

In other procurement news this week…

Starbucks Testing Blockchain

  • Starbucks is piloting the use of data technology, including blockchain, to make its coffee supply chains more transparent
  • The firm hopes the technology will provide real time information about the beans within the supply chain and help financially empower rural farmers
  • Kevin Johnson, chief executive officer at Starbucks, said: “Over the next two years, we will look to demonstrate how technology and innovative data platforms can give coffee farmers even more financial empowerment

Read more on Supply Management 

Amazon’s Latest Drone Patent

  • Amazon’s latest patent is a delivery drone that understands when you shout at it
  • The drone is designed to recognise human gestures, and then respond accordingly. Gestures the drone would recognise include, for example, waving arms, pointing, the flashing of lights, and speech
  • An illustration demonstrating the drone’s functionality shows a man wildly waving his arms and with a speech bubble next to his mouth

Read more on The Verge 

Procurement Pros: Make Like Lady Gaga

If your procurement job is making you feel like you’re stuck in a Bad Romance you need to make like Lady Gaga! Embracing collaboration will have you on The Edge of Glory in no time!

Matteo Chinellato/Shutterstock.com

When you think of great, inspiring role models for the procurement profession, pop-music superstar Lady Gaga might not be the first person who springs to mind. But just hear us out… (if you can get the tune to Poker Face out of your head!)

At last week’s Ivalua NOW conference in London, Peter Smith, Managing Director – Spend Matters UK/Europe argued that Lady Gaga is the perfect model for CPOs and procurement leaders across the globe, and not just because of her wildly catchy tunes!

Rolling Stones vs Lady Gaga

Flashback to the 1960s/70s and imagine you’re Mick Jagger going out on tour with the rest of the Rolling Stones, Peter proposes. You’re part of a pretty small team. You might be playing the biggest venues and drawing in the biggest crowds but you’re out there on stage with only your bandmates and perhaps a small supporting crew.

Fast forward to the noughties and Lady Gaga is ruling the music scene, and under very different circumstances. A global Lady Gaga tour might recruit hundreds of people. There’ll be choreographers, dancers, backing singers, caterers, tech team, musicians, management, merchandise sellers…the list is endless.

A one-woman show is actually a team effort, a collaboration, with the star herself at its helm. She’s the leader, the strategist who must pull everyone together, in true gig economy style, to deliver the spectacular that’s expected of her.

If we look at the American music charts today, over 50 per cent of the top ten entries are collaborations and, in the UK Top 10, 7 entries are collaborations.

Artists have realised that 2 + 2 can equal 5.

Procurement needs to start thinking this way. Think about how Lady Gaga puts on her show. Think about how collaboration can deliver real value for your team and the wider organisation. By bringing together the suppliers, the engineers, the solution providers and the data experts, procurement can deliver a whole lot more.

Every industry is being shaped by digitisation and the rapid change in today’s world. Given that new sources of risk and competition are emerging all the time procurement needs every hand on deck!

Improving the bottom line with collaboration

Hemant Gupta, CFO & Head Commercial, Legal & Secretarial Blackberrys knows a thing or two about the benefits of collaboration.

Blackberrys, now a leading menswear brand in India has endured its fair share of supply chain struggles in recent years.

Hemant admits, during his keynote at Ivalua Now, that sourcing has been “a very tricky subject for Blackberrys” and their efforts to drive margin improvement and competitive advantage has been a journey.

Only a few years ago, Blackberrys still employed very traditional methods of sourcing. They had no visibility, no transparency and no way of maintaining a centralised system for their data. “Searching the vendor database for sourcing to look at our historic pricing was not possible.”

“The consumer is not brand-loyal any more. They just want the best price, which is increasing demands on the retailer – our discounting has increased by 25 per cent. As CFO I need to improve the bottom line and improve our sourcing process.”

“cost cutting is no longer the solution to sustainable profitability, the key to success is finding creative ways to optimize it” he asserted.

With the help of Ivalua, Blackberrys were able to start their transformation journey, which did face some resistance from employees at first. “People are always skeptical about new processes so collaboration is key,” Hemant explained.

But within a couple of years Blackberrys data started to improve with the involvement of internal customers and they began to automate some processes. They had improved control and transparency and benefited from lower risk and increased efficiency.

4 tips to make your sourcing transformation a success

Hemant shared his key learnings from Blackberrys’ sourcing transformation journey.

1. Challenge status quo

It’s human nature to think whatever we are doing, we are doing it right. You have to train yourself to change that.

2. Collaboration is key

Resistance to change is normal but you need 100 per cent commitment from leadership and strong champion. You also need to ensure you’re pulling all of your procurement resources – teamwork is dream work!

3. Identified -> Realised savings!

It’s imperative to follow through post sourcing processes.

4. Make it a lifestyle

eSourcing is not just about saving cost but cost avoidance and transparency – compliance.

Ivalua Now, The Voice of Procurement is coming to Paris on 29th March and New York on 17th May. Find out more here. 

7 Warehouse Management Tips to Improve Inventory Control

In every business, there is one silent player that can absolutely make or break your operation — the warehouse.

 

Warehouses  form the nucleus of numerous businesses and it is imperative that they are managed efficiently. However, its size and structure can become overwhelming if not managed properly. You can manage it efficiently by implementing a warehouse management system, with which you can control the movement and storage of the materials within the warehouse. Additionally, you can incorporate tasks like transportation management, accounting systems, light manufacturing, etc.

Managing inventory effectively and maximizing warehouse productivity rank on top of the priority list of almost all the warehouse managers. If you are one of them, these 7 warehouse management tips will help you in improving inventory control and achieving effective warehouse management.

  1. Plan An Efficient Layout

The warehouse layout must be carefully planned out in order to maximize storage space. You must arrange the space in a manner that allows you to move smoothly and with ease while carrying goods around the warehouse. You must keep enough space to maneuver the forklifts and weight carrying machines around without any hindrances. Mark the bins and place them in a planned manner to avoid confusion and stocking of goods at inappropriate places. The right layout will also help in minimizing safety hazards.

  1. Stock Inventory As Per Need

You must arrange your inventory based on how and when you use/need it. You shouldn’t hoard inventory unnecessarily throughout the year unless there is a regular demand. Keep the stock levels at 1.5 times the average for avoiding blocking of working capital. With optimised inventory holding, you can effectively reduce the cost of storage. You can study historical trends as a part of your warehouse management process to forecast the inventory need.

  1. Apply Cross Docking to Maximize Space

The objective of cross docking is to reduce the shelf storage time of stocks in the warehouse. It helps in transporting warehouse delivered goods quickly to the outbound carriers that can take the stocks to distribution centres. You have to ensure that the warehouse layout supports cross docking.

  1. Implement Strict Standards for Safety

Don’t make your warehouse an unsafe place for your employees. If your staff isn’t trained properly, you will have numerous accidents and high injury rates. Ensure that only the well-trained and experienced employees operate heavy duty equipment such as forklifts. Mark the safety protocols in the warehouse, such as indicating a safe distance from danger zones.

  1. Incorporate Efficient Weighing Systems

Make efficient weight scales, such as truck scales, an integral part of your warehouse as it helps in optimising all the weighing processes. You can improve the accuracy of the billing and shipping tremendously, thus increasing the revenue. The overall workflow productivity is also enhanced.

  1. Use Technology to Enhance Inventory Management

Technology is a good friend to have in the warehouse. New robotics technology has become the most sought after technology in many companies. You can partner up with warehouse management systems and create customized software and smart robots that can help in managing the movement, storage and sorting of warehouse inventory. Automated vehicles come a close second. By incorporating self-driving technology in the warehouses, you can reassign human labor to more critical jobs and enhance safety and efficiency.

3D printing technology allows on-demand production of various components for manufacturing at the location itself. It can effectively eliminate the need for any transportation, thus reducing the cost and lead times significantly. Innovation of newer, lighter and stronger materials like nanotubes and graphene is also exciting news for warehouse and logistics management. You need less energy to transport lighter materials and equipment. To make it even better, self-repairing finishes and self-assembling materials are already in developmental testing!

  1. Improve Demand Planning

Demand planning is a crucial part of forecasting inventory purchases, stock requirements and customer buying trends. This helps in optimizing inventory levels and meeting the demands of the customers at the same time. When the demand planning is effective, you can track the sales trend history, product activity during specific seasons of the year, trends of various manufacturers and different rules of warehouse storage and business.

Don’t let the complexities of a warehouse wear you down. With careful and efficient planning, you can achieve your goals and manage every single warehouse with high efficiency.

Kevin Hill heads up the marketing efforts and provides technical expertise to the sales and service teams at Quality Scales Unlimited in Byron, California.

The Samsung Smartphone Debacle: Suppliers Pushed Too Far, Too Fast?

Samsung has apportioned some of the blame for its exploding Note 7 phones to two of its battery suppliers. But who is ultimately responsible? Is the pressure to innovate at all costs leading to unsafe development and testing time-frames?

Esa Riutta/Shutterstock.com

What Went Wrong?

Samsung  has begun the long task of rebuilding consumer trust in its smartphones. But questions remain.   Why didn’t Samsung pick up design and manufacturing faults before they sold 1 million unsafe devices to customers? The cause appears to lie in Samsung’s rush to beat its arch-rival Apple to market. This led to a failure to properly test lithium-ion batteries in the Note 7 phone.

The pressure to innovate that tech giants such as Samsung place on their suppliers is immense. Particularly when competitors such as Apple are constantly upping the ante. Every new release on a phone must be demonstrably better than the last.  This means delivering ever-smaller and lighter batteries that customers can charge rapidly and use for a full day and evening.

Battery manufacturers responded to the challenge by using a thin “club sandwich” design. In this battery positive and negative electrodes are stacked and kept apart using layers of separators. Unfortunately, the pressure for an ever-thinner battery meant that the separators were too thin, leading to shorts and subsequent over-heating. A second, unrelated design fault lay in an abnormal welding process. This led to contact between a positive terminal and a negative electrode.

Spreading the blame

The fallout for the exploding smartphones follows a familiar pattern where, although the technical fault lies with a supplier of products and services, the big-name parent company takes the lion’s share of the blame. Even when the parent organisation attempts to publicly offset some of the blame onto its suppliers, consumers typically assign responsibility to the most recognisable brand.

An example of this famously occurred in April 2010 with the Deepwater Horizon oil spill in the Gulf of Mexico.  The owner of the well, BP, took most of the responsibility (and $54 billion in associated costs), whilst the contracting operators came under considerably less scrutiny. Tellingly, a U.S. District Judge apportioned 67% of the blame for the spill to BP, 30% to Transocean and 3% to Halliburton.

Samsung, to its credit, did accept overall responsibility for the $6.9 billion mistake even while it pointed the finger at battery manufacturers. Samsung Electronics America senior vice president Justin Denison told a press conference: “Ultimately we take responsibility for this. It’s our product, we set the specifications, and it’s up to us to catch the problem before it leaves in one of our devices.”

The long road to brand recovery

Youtube users may have noticed Samsung’s brand-repair efforts have gotten underway, with ads such as the following appearing online:

The South Korean company has invested $170 million into safety.  It is assertively broadcasting its new 8-point safety check which includes a durability test, visual inspection, x-ray test and others. Samsung’s investigation into the Note 7 failures included over 700 R&D engineers. These engineers tried to replicate the issue by testing 200,000 phones and 30,000 standalone batteries.

But, in a further unfortunate setback for the brand, one of the affiliates responsible for manufacturing the faculty batteries – Samsung SDI – experienced a factory fire last week in Tianjin, China, with 110 firefighters and 19 trucks responding to the blaze.

Senior executives from Samsung have commented that they’ve learnt an enormous amount about crisis management in the past few months. Observers, too, can draw some valuable lessons around the dangers of rushing new innovations to market and the ineffectiveness of attempting to apportion blame to suppliers.

Read more about Samsung’s smartphone battery issues.

In other procurement news this week…

Boeing’s Space Taxi to include 3D printed components

  • Boeing has commissioned 600 3D printed components from Oxford Performance Materials for use in its Starliner space taxi.
  • Boeing expects the spacecraft to fly unmanned in June 2018. and will have a first crewed test flight in August 2018. It will ferry two astronauts to the International Space Station for the first fully operational flight in December 2018.
  • The inclusion of 3D components marks a first for 3D technology usage in spacefaring technology, with increasing recognition that printed plastics perform well under the pressure of launch and in a temperature of absolute zero.

Read more at Supply Chain Dive.

New research reveals CEOs still don’t “get” procurement

  • Consultancy firm 4c Associates released the findings of a poll of 521 CPOs, managers and procurement personnel to understand how procurement is perceived by the C-Level.
  • 48% of participants claimed their boss “doesn’t get what the procurement team does, or can do”. 55% said the C-Level regards procurement as a support function. It exists to cut costs, rather than add strategic value to the organisation.
  • Mark Ellis, senior partner at 4c Associates, commented that procurement needs to proactively highlight the services they can provide beyond cost cutting. “If all the function does is speak in terms of savings, then that’s how it will be perceived: as a cost cutter”, Ellis said.

Why “Free Help” With Buying Decisions Costs More

As consumers, we’re wary of so-called “free” products and services as there’s always a hidden cost. Why, then, are procurement teams willing to accept free help with supplier selection?

Businesses often seek help with their buying decisions, especially in complicated categories such as telco or energy. Preparing an RFP requires a willingness to trudge through data swamps, while analysing supplier responses requires more than a strong coffee to do properly.

When a third-party broker says that they’ll help – for free – the temptation is to say yes, if only to avoid data swamps and caffeine addiction. However, you need to keep in mind that the people who help “for free” are still going to get paid, just not directly by you. They’ll collect their pay from your suppliers who are willing to pay a commission to get the opportunity to service your organisation. In turn, those suppliers recover commissions from their customers (you), either as a line item on the bill or through higher prices. In the end, you’re still paying for the service, just not up-front.

For large businesses with lots of cost centres, this can be a good way to share the cost of getting help. Branch stores pay their bills and, without realising it, pay for the help you received through higher prices. Procurement managers who use this approach can look like heroes because they claim savings and a successful outcome without having to win broad company endorsement for using expensive 3rd-party assistance.

Selecting suppliers for the wrong reasons

The danger of commission payments is that different suppliers pay different amounts. Some commissions contain a ratchet mechanism with longer contract terms, while higher contract values generate higher commissions.

Unfortunately, brokers who offer their services for free are incentivised to select the suppliers who pay them the most, rather than those who deliver the greatest value to the customer. The usual outcome is long-dated contracts with a single source supplier. At least the billing is easy, but your business will end up paying more in the long-term due to lack of value.

Up-front payments

Paying brokers up-front changes their incentives. Instead of focusing on supplier commissions, they now focus on demonstrating their value to you in a bid to win further business from your organisation. “Brokers” go upmarket and call themselves “consultants”, working harder to realise the greatest-possible savings and service levels. Customer and consultant incentives align.

The positive consequences of fee-for-service payments are shorter contract terms and more suppliers. Shorter contracts reflect a balance between testing market prices with the logistics of changing suppliers. Having more suppliers means you are able to split your requirements across the lowest priced suppliers to get the best possible price for your portfolio of demand, rather than being herded toward a single-source supplier.

“Free” services in IT

For software companies, “free” represents a gateway product, or a way of demonstrating the value of a software product to the customer. It means the software provider doesn’t have to employ a slick-suited sales person and can scale the work of their t-shirt clad developers. Salesforce, one of the leading dealers of enterprise SaaS, costs their customers on average $45,000 per annum. The entry level CRM package is $5 per user but customers quickly pay more to satisfy their needs, getting more value from the base CRM product as they buy additional features and capability.

Our approach at Kansoly is the same. We’re a cloud-based telco procurement platform for businesses running RFPs and reverse auctions. Our base product is free, where we offer to run a telco RFP for you for nothing. What’s in it for us? We gain customer insights and supplier engagement, both vital for making our product better and delivering more value to our larger, fee-paying customers. Our free customers get competition for their services and cost analysis that they would otherwise have to invest in.

Brokers and consultants have always been part of the procurement landscape, but their incentives are defined by the way they’re paid. However, the development of Saas procurement platforms increasingly means that free offers aren’t always related to low-value outcomes.

Bruce Macfarlane is the founder of Kansoly, a telco procurement platform for business. Kansoly runs RFPs and reverse auctions for data, mobile, or fixed line.

Trade War Against China? A Supply Chain Perspective

Comments made by President-elect Trump last year sparked talk of a trade war with China. But what impact will this have on supply chains?

This article was originally published on My Purchasing Center.

The Chinese government recently raised a “tit for tat” challenge to new U.S. President-Elect Donald J. Trump over a potential trade war against China, in an editorial published on China’s international state news outlet Global Times.

The op-ed states that “[a] batch of Boeing orders will be replaced by Airbus. U.S. auto and iPhone sales in China will suffer a setback, and U.S. soybean and maize imports will be halted…” if Trump decides to impose a proposed 45 per cent trade tariff.

A Special Trade Relationship

To overstate the significance of the U.S.-China trade partnership is quite difficult.

In 2015, they accounted for $659.4 billion in bilateral trade, of which $161.6 billion were Chinese imports of U.S.-produced goods. As the largest, and yet still one of the fastest-growing consumer markets in the world, China is vital to the strength and prosperity of America’s export economy.

Most notably, of the American-made products included in the Global Times statement, agricultural products ($20 billion), aircraft ($15 billion), and vehicles ($11 billion) are amongst the highest value U.S. export categories. They are therefore critical to the success of American companies operating in these industries.

From China’s perspective, it is no longer the emerging market economy of decades past. It can instead rely on its own considerable production capabilities, rather than sit by the wayside as the U.S. attempts to push a trade agenda through its considerable economic muscle.

iPhone Impact

Amongst the multi-billion-dollar trade categories, the iPhone may seem like a curious inclusion. However, despite FY2016 sales of nearly $50 billion in China market, Apple’s Chinese revenues are still projected to grow.

Beyond the obvious consequences of an iPhone sales freeze, or a 45 per cent trade tariff on Apple’s top line, there are also significant economic implications behind China’s statement from a supply chain perspective. In particular, from the viewpoint of a procurement specialist.

As the most valuable company in the world, Apple’s tremendous growth in recent years has primarily been driven by sales of the iPhone. The device made up over 63 per cent of Apple’s FY 2016 revenues.

Analyst estimates of the iPhone’s profit margins have put it at over 70 per cent of retail value. This makes it by far the most lucrative amongst Apple’s products, and likely across the spectrum of consumer technology products.

According to a recent report by BMO Capital Markets, the iPhone took an astonishing 103.6 per cent of smartphone industry profits in Q3 2016. What enables the iPhone to reap such staggering margins is largely due to Apple’s global supply chain. It entails near end-to-end cost minimisation, and an integrated procurement strategy from its hundreds-strong global supplier network.

Value Chain Activities

Apple’s value chain, from its inbound logistics and manufacturing through outbound logistics and marketing, all go through China in one way or another. Procurement plays a central role in providing each activity with the necessary resources to operate efficiently and at low cost.

A proposed 45 per cent Chinese trade tariff would fundamentally alter how, and from where, Apple procures the majority of these resources. It would also significantly drive up costs and logistical complexities throughout the whole of its global supply chain.

It is important to note that very few companies possess the in-depth supply chain practices of Apple. Therefore, integrating a centralised procurement structure into such companies’ supply chains becomes even more critical.

The prevalence of global supplier and distribution networks, like Apple’s, across modern manufacturing companies relays the important role of procurement specialists in the development of integrated strategies. These strategies must not only generate value, but also mitigate the multitude of risks associated with maintaining international supply chains.

In the event of significant geo-political and economic shocks, such as a potential U.S.-China trade war, procurement can work closely with companies to ensure manufacturing processes are harmed as little as possible.

This means that across affected countries, companies can rest assured that their sourcing, manufacturing, distribution and sales activities can be substituted quickly and cost-effectively through alternative sources, while maintaining similar levels of cost and operational efficiency.

Ultimately, no one can say for sure whether President-elect Trump will initiate a trade war with China. Or to what extent Apple and companies like it will be affected. However, companies with an established supply chain and sound procurement practices can sleep in comfort knowing that they will be prepared to face similar challenges that may come their way.