Tag Archives: supply chain news

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

Is Australia’s Proposed Modern Slavery Bill Well Below Par?

Australia’s new modern slavery bill is a welcome development in the fight to end slavery worldwide. But is the proposed legislation up to standard? 

In April 2016 the UK passed  new legislation, the first of its kind, making it compulsory for all businesses with a turnover of over £36 million to prove they have taken steps to remove slave and child labour from their supply chains.

Legislation like this, which also exists in France the Netherlands and the US,  forces big organisations to fully audit their supply chains and has consequently put pressure on smaller businesses to eradicate the practice too.

This week, Australia announced it would be following suit, proposing a Modern Slavery Bill, which uses the UK’s act as a model.

The bill, introduced by Assistant Minister for Home Affairs Alex Hawke, “seeks to stamp out the sale of any product in Australia that involves non-voluntary labor” and will require Australia’s organisations with an annual consolidated revenue of more than $100m (around 3000 businesses) to publish annual statements on the efforts they are making  to tackle modern slavery in their supply chains. These statements will have to be signed off at board level and published within six months of the publication of their annual reports.”

The Department of Home Affairs will also start publishing an annual statement on possible modern slavery risks in commonwealth procurement.

The proposed bill follows the Federal Government’s announcement in May that $3.6 million would be provided to the Department of Home Affairs for a new Anti-Slavery Business Engagement Unit to manage Modern Slavery Reporting Requirements by large businesses.

Part of this task will be overseeing a publicly accessible central repository of businesses’ Modern Slavery Statements, as well as providing support and advice to businesses on modern slavery risks.

The announcement was well received by anti-slavery charity walk Free Foundation. “The Australian Government’s commitment to support an Australian Modern Slavery Act with a new, well-funded unit is clear progress towards the Act’s effective implementation” said Jenn Morris,  Chief Executive.

Is the proposed modern slavery bill up to scratch?

Australia’s proposed Modern Slavery Bill has sparked some controversy amongst charities and human rights campaigners for a number of reasons.

  1. The bill proposes that only businesses with a revenue of over $100m must audit their supply chains. The Law Council has argued that the revenue threshold should be much lower – no higher than $60m to demand compliance from more organisations
  2. The bill doesn’t demand that there will be a public list of who must report. Without this information, if companies fail to act, this fact will remain hidden
  3. The bill does not propose any penalties for organisations that fail to report their findings or report incorrect or misleading information on the steps they have taken to combat modern slavery. Clare O’Neil, the shadow minister for justice said “we shouldn’t be leaving it to business to police themselves on slavery”
  4. The government have not established an anti-slavery commissioner to enforce the legislation nor vowed to provide access to a national redress scheme for victims of modern slavery

Keren Adams, director of legal advocacy at the Human Rights Law Centre, said “It’s absolutely the right step for the government to be introducing legislation to help flush out abuse, but today’s bill is missing some vital ingredients that would make it effective in doing so.”

Modern slavery: know the signs

Procurement and supply chain professionals are uniquely positioned to identify and tackle modern slavery in their supply chains. But you need to know the signs…

Firstly, it’s important to understand and look for the red flags, which might be extremely subtle. The likelihood of modern slavery is increased in conflict zones and unregulated sectors, particularly if the jobs are low-income and do not require education or specific skills. Migrant workers, women and children are among the most vulnerable.

Circumstances when passports or identification documents have been removed, excessive recruitment fees are subjected upon migrant workers or subcontractors further outsource work without prior consent are all indicators of exploitation.

Encountering one of these situations may not in and of itself amount to modern slavery but your organisation mustn’t assess anything  in isolation. It’s important to look for the series of signals in order to  decipher whether they paint a clear picture of modern slavery.

“Procurement teams are on the frontline,” Fiona David, former Executive Director Global Research  – Walk Free Foundation asserts. “They manage supplier relationships, they understand the business, the risks and the regions in which they operate. The indicators of modern slavery, being a grievous crime, is actually quite easy to identify, when you know what you are looking for.”

But advocacy groups and investigative reporters mustn’t be the sole figures doing the digging to reveal incidents of modern slavery.

“CSR and Procurement teams should work together across the sectors on these issues, as addressing modern slavery is a “pre-competitive” issue.  Companies can’t compete on sub-standard ethical and criminal practices.”

Have a listen to our recent webinar on modern slavery, Procurement Unchained. 


Jaguar Land Rover (JLR) warns of mega Brexit costs 

  • JLR has become the latest firm to warn of the costs of losing frictionless trade between the UK and EU.
  • JLR said more than 40% of parts going into cars built in the UK were imported from Europe and it spent £5.37bn with EU suppliers in 2017-18.
  • “A bad Brexit deal would cost Jaguar Land Rover more than £1.2bn profit each year. As a result, we would have to drastically adjust our spending profile; we have spent around £50bn in the UK in the past five years – with plans for a further £80bn more in the next five. This would be in jeopardy should we be faced with the wrong outcome” said Ralf Speth, CEO of JLR.

Read more on Supply Management  

Donald Trump imposes first tariffs on China

  • Punishing American tariffs on Chinese imports took effect early on Friday, marking the start of President Donald Trump’s trade war with the largest US trading partner and intensifying the anxieties of global industry.
  • The arrival of the long-threatened tariffs marked the failure of months of dialogue between the world’s two largest economies
  • An industrial survey confirmed that companies were white-knuckling their way through Trump’s intensifying, multi-front trade assault.

Read more on the Telegraph

Grenfell: Inspectors label procurement a ‘fundamental problem’

  • A leading industry certification and inspection body has labelled the procurement process a “fundamental problem” that has led companies to become “complicit in poor outcomes”.
  • Speaking yesterday at a select committee hearing on Dame Hackitt’s review of Building Regulations, British Board of Agrément chief executive Claire Curtis-Thomas said the procurement process for main contractors represented a “real problem”.
  • In Dame Hackitt’s post-Grenfell review of Building Regulations, it was suggested the industry should take the lead and decide for itself how to improve building quality and standards.

Read more on Procurious 

There’s One Key Reason To Buy American In 2017

With the Trump administration’s “Made in America” campaign in full swing, attention has turned to the Pentagon’s global supply chain. The reasons to Buy American might be a little more compelling than you expected….

In 1933 Franklin D. Roosevelt signed into law the 1933 Buy American Act which required the Pentagon to purchase US-manufactured products for anything over a $3,500 threshold. The military supply chain looked very different to today’s, over 80 years later.

The law required that the U.S. military’s entire supply chain be sourced domestically, from the textiles that go into uniforms to the raw materials that are used to create tanks and other weaponry. Roosevelt’s intention was clear: firstly, the law was a patriotic one, with the ‘buy American’ message resonating as strongly in the 1930s as it does among voters today. More importantly, the Act was designed to ensure a strong manufacturing base, critical to the country’s recovery from the Great Depression.

Roosevelt said in 1940: “Guns, planes, ships and many other things have to be built in the factories and the arsenals of America. They have to be produced by workers and managers and engineers with the aid of machines which, in turn, have to be built by hundreds of thousands of workers throughout the land.”

Is Buy American realistic in 2017?

While the 1933 law is ostensibly still in effect, the military supply chain draws heavily on foreign materials and components. In 2013, for example, nearly $20 billion (6.4 per cent of all U.S. military spending) went to overseas entities. This is achieved through the use of exemptions or waivers, which guarantee flexibility and security of supply.

After the White House published a “Buy American” executive order in April, the Office of Management and Budget provided new guidance to federal agencies on enforcing the existing laws, limiting exemptions and maximising the procurement of U.S. products. The Pentagon’s acquisitions office has reportedly instructed its contractors to put in place a training program on how to comply with the 1933 law.

However, there are also a number of materials that simply can’t be found or manufactured domestically, such as the rare earth element needed for flame-resistant rayon fibres used in uniforms (sourced solely from Austria), night vision goggles (91 per cent of which are from China), or lithium ion batteries, semiconductors, microchips and even missile propellant.

Is cybersecurity a reason to Buy American?

Two of the reasons for the 1933 Buy American Act – building patriotism and manufacturing jobs – still remain valid and are a key focus on Trump’s administration, but in today’s world of hi-tech military hardware, there’s a third, critical factor – cybersecurity.

Commentators are alarmed by the presence of Chinese-made microchips in America’s most advanced fighter jets, while components from other foreign entities can be found in American communication satellites, unmanned drones, bomb disposal robots and other gear. Futurist and author Peter Singer, predicted that these microchips could be used to “blow American fighter jets from the sky” if the two countries were ever to go to war.

While very little can be done about the rare-earth materials and metals found only outside of the U.S., it remains to be seen whether the Made in America push will lead to supply chains for vital components including microchips and semiconductors re-shored to the U.S.

In other news this week…

Supply Chain Management software market booming

  • Analyst firm Gartner has announced that the supply chain management (SCM) software market will reach $13 billion by the end of this year, up 11% from 2016.
  • Gartner has also predicted the market will exceed $19 billion by 2021.
  • Growth is being driven by a demand for agility, as vendors move to cloud-first or could-only deployment models, while end-users are becoming more comfortable about cloud security and recognise the benefits of software-as-a-service solutions.

Read more on MH&L news 

When does an SME need a procurement function?

  • New research from Wax Digital has found that having a procurement function is just as vital for SMEs as it is for large corporates.
  • The UK-based survey found that 75% of respondents said procurement was needed once a company reaches a £50M turnover, 77% claim to need procurement by the time it has 100 supplier contracts, and 72% said that procurement was necessary once 500 invoices per month were being processed.
  • Rising costs was the most common reason for introducing procurement, followed closely by inefficient processes and increasing business risk.

For more information visit www.waxdigital.com

Elon Musk’s Hyperloop hits the news again

  • Tech entrepreneur Elon Musk made headlines on Friday when he announced via Twitter that he had “verbal approval” to build a hyperloop – an ultra-high-speed underground transport system – linking New York and Washington DC.
  • If it goes ahead, passengers and cargo would be packed into pods and shot through a system of giant vacuum tubes on magnetic cushions, cutting the current travel time from nearly three hours (high speed train) to 29 minutes for the 355km journey.
  • Musk has also been in conversation with Chicago and Los Angeles officials about hyperloops.

Read more at Financial Review

 

Apple To Finally Get Into Bed With Amazon

Will Apple and Amazon put aside their differences and unite in time for the launch of Apple TV? 

The professional relationship between tech giants Apple and Amazon has been rocky to say the very least.

Firstly, In 2014 Amazon removed  in-app payments from the iOS versions of several of its services  in response to Apple demanding a 30 per cent share of the profits.

And then, in what was considered by many to be a bizarre decision, Amazon announced in October 2015 that it would no longer be selling Apple TV or  Chromecast because of the direct competition between them and Amazon’s own streaming products.

At the time, the move was likened to Apple TV’s refusal to play Netflix’s streaming service because they did not want to promote a competitor, but Apple eventually gave in.

Whilst certain reports this week suggest there are changes in the waters, Amazon’s Echo Show announcement  this week might be a little too close for Apple’s comfort.

Will Apple Echo Amazon’s product?

Last week, Amazon introduced the latest Alexa expansion, unveiling an Echo with a touch screen and a camera. The Echo Show features “everything you love about Alexa” with the added benefits of being able to show you things – whether it’s the weather forecast, a wikipedia page, a video, photos and more.

The device allows users to video chat with anyone who has an Echo, Echo Dot or the Alexa App, posing a big threat to Skype and  Apple’s FaceTime video-calling service.

Watch Amazon’s Introducing Echo Show video below to find out more.

The device costs $229 and is expected to be a huge hit when it begins shipping in late June, quite possibly to the dismay of Apple.  Indeed, the rapid speed at which Amazon has managed to expand its Echo hardware and the reasonable price points present a real threat to Apple.

As its already proven many times, Amazon is in the unique position to deny competitors access to its store. And that’s not to mention it’s currently ahead of the game and anything Apple subsequently releases is likely to come with a hefty price tag.

Time will tell what Apple has up its sleeve and whether consumers are willing to sack in their i-products for Echo.

Amazon Video for Apple TV

Various rumours have suggested this week that Amazon and Apple are headed in a much friendlier direction.

Last Thursday, Buzzfeed announced that the one major flaw of Apple TV was to be addressed: Amazon’s Prime Video service will, at last, be made available. Apple are expected to announce an Amazon Video app designed for Apple’s set-top box at the Worldwide Developers Conference (WWDC) on June 5 in San Jose.

Last year Amazon CEO, Jeff Bezos, explained that the company was waiting for  “acceptable business terms” with Apple before  a Prime Video app was considered.  Perhaps those terms have now been agreed.

If all goes ahead, Amazon is expected to return the favour by resuming sales of Apple TV’s on its website, following a two year hiatus.

In other news this week…

Co-op releases first slavery statement under the Modern Slavery Act 

  • Co-op has outlined how it sources, the clauses it uses in contracts and the steps it takes to audit suppliers withe regards to modern slavery. It also describes how the Co-op helps former slaves into work.
  • The 10-page statement outlines the Co-op’s ethical policies, its supplier approval process and how it carried out 444 audits in 2016.
  • The Co-op said it provided training for suppliers and it planned to develop a new procurement academy and roll out a business-wide training and awareness plan on ethical sourcing.
  • Cath Hill, group marketing director at CIPS, said: “The Co-op’s modern slavery statement is an excellent example of what organisations should be doing to combat this important issue. “

Read more on Supply Management 

Like coffee? You’ll like it even more when it’s sustainable!

  • Australians use an estimated one billion disposable coffee cups annually, but these cups are not recyclable in most states…until now!
  • Melbourne-based social entrepreneur Soula Thuring has taken the direct approach, selling biodegradable coffee cups with an additional Enviro Grow kit which turns the used cup into a plant
  • The $2 Grow Cup of Life kit contains a soil pellet that expands with water, a seed mat and instructions for growing kale, beetroot, rocket and other healthy foods. It can be planted in the backyard or elsewhere and it breaks down in a few months
  • Recently the social enterprise, Streat, teamed up with Melbourne-based coffee startup Pod & Parcel to put its coffee in biodegradable coffee pods to be used in Nespresso machines

Read more on The Guardian 

2017 FM Global Resilience Index exposes supply chain risks

  • The 2017 FM Global Resilience Index, which was recently released, provides SCMR readers with additional insights on emerging nations
  • The annual index, which is online and interactive, ranks 130 countries and territories by their enterprise resilience to disruptive events
  • Supply chain managers are being told that three of the most pressing risks to business performance in the 21st century are cyber attack, natural hazards and supply chain failure

Read more at Logistics Management 

Image credit: AppAdvice

Desperation: Somali Piracy Back On The Rise

After a relative hiatus over the past five years, international supply chains are once again threatened by a resurgence of piracy off the coast of Somalia.

Vladislav Kudoyarov/Shutterstock.com

At the height of the Somali pirate crisis in 2011, 151 vessels were attacked in one of the world’s busiest shipping routes. Thousands of hostages were taken and billions of dollars were lost in ransom, damage and delayed shipments.

An unprecedented international response saw the dispatch of over two dozen vessels from the EU, the U.S., China, Russia, India and Japan, which succeeded in reducing the number of attacks down to only 17 in 2015, mainly involving smaller fishing vessels.

However, last month, dozens of armed men in two small skiffs captured the Aris 13, an oil tanker flying the flag of Comoros, and escorted it to be ransomed in the semi-autonomous northern Somalian region of Puntland. The vessel was attempting to pass through the Socotra Gap, a route between Ethiopia and the Yemeni island of Socotra, when it was boarded by pirates. The route is often used by vessels as a shortcut to save time and money, but has been identified as a high-risk area by anti-piracy groups. According to reports, the Aris 13 was “low, slow and too close to the coast”, making it an easy target for armed attackers.

The Aris 13 was the first large commercial vessel to be captured since 2012, when the Greek-owned MV Smyrni, carrying 26 crew and 135,000 tones of crude oil, was held in a pirate anchorage for 10 months before being released for an undisclosed ransom.

Speaking at a news conference in late April, U.S. Defence Secretary Jim Mattis told reporters there have been “five or six” piracy incidents in the region in the past two months. An anonymous defence official told The Washington Post  that the increase in pirate activity could be linked to complacency among shipping companies, who may have relaxed their security procedures (such as carrying anti-boarding devices and armed contractors) in recent years.

What drives people to risk piracy?

Whilst the international naval response to the piracy crisis has been effective, the situation is expected to continue until the root cause is tackled – the lack of authority of Somalia’s central government. The country has been labelled a “failed state” since a bloody clan-based civil started in 1991. Other factors that drive piracy include:

  • Widespread drought and famine
  • Local anger over illegal foreign vessels fishing in Somali waters
  • Extreme unemployment with no factories or industry
  • Very low earning for fishermen (approximately US$5 a day)
  • The lure of high potential earnings from piracy and ransom money
  • Cash from piracy providing the first boom in living memory in coastal towns.

Reports are also emerging of piracy on the rise on the other side of Africa, along Nigeria’s coastline. Pirates have taken to kidnapping crew members for ransom along the major oil shipping route. Previously, hijackers would siphon off oil from commercial vessels, but now that oil prices have fallen, abductions have proven more lucrative.

In other news this week:

Uber to unveil flying taxi service by 2020

  • Uber has announced “Elevate”, a flying taxi service featuring electric vehicles capable of a vertical take-off and landing.
  • Users will be able to book a ride with their mobile phone app, with Uber’s marketing team already spreading the message of “push a button, get a flight”.
  • The biggest selling point of the urban air network is that it would be able to avoid congested streets in busy cities. The service is expected to launch first in Dubai and Dallas.

Read more at Smartcompany.com.au

 ISO 20400 launched to support sustainable procurement

  • The world’s first international standard for sustainable procurement was launched last week. ISO 20400 was created with the input of experts and industry bodies from over 40 countries and is expected to increase supply chain transparency globally.
  • The Standard is applicable to any organisation, public or private, irrespective of size and location.
  • Read more about the background to ISO 20400 in Procurious’ interview with committee member Jean-Louis Haie.

Access ISO 20400 here.

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.

Keen on the Internet of Things? Beware of IoT Botnet Zombie Attacks!

Everyone’s talking about the Internet of Things and all of the exciting things it can do for us! But just how much have we considered the possible security risks? 

What’s All the IoT Fuss About?

CPOs are becoming ever keener on enhancing hyper-connectivity within their organisations using the Internet of Things. This is unsurprising given the potential opportunities for procurement teams; warehouses that can tell you what parts you’re running out of and reorder them for you, more efficient processes and the chance to revolutionise how they manage supply chains.

Of course, it’s not just businesses that will benefit from IoT. Early adopters are already using IoT in their homes with smart fridges, smart toasters and smart collars for their pets. Experts predict that by 2020, more than half of new organisations will run on IoT.

Given all of these benefits, you might well ask what’s not to love? Well, judging by recent events, it might be prudent for us all to exercise a little more caution as far as IoT is concerned. As it stands, the process is wide open to cyberattacks.

Botnet Zombie Attacks

Individual devices pose almost no threat to any computer or data centre but what happens if millions of them were taken over at once? IoT devices are likely to have weaker security (research suggests that default usernames and passwords for devices are rarely changed), which makes them an easy target. Hackers will pre-program their malware with the most commonly used default passwords in order to hack multiple devices.

Back in October, an IoT botnet, Mirai, attacked a number of the internet’s websites including Spotify, Netflix and PayPal. The botnet works by consistently searching for accessible IoT devices protected by default passwords. Once these have been identified, the malware turns them into remotely controlled bots and is able to use them for large-scale network attacks – think robot zombie army!

This week, computer security journalist Brian Krebs posted an article on his blog, Krebs on Security, revealing the identity of Mirai author to be Paras Jha, owner of a DDoS mitigation service company ProTraf Solutions and a student of Rutgers University. Whilst Mirai has only been used mischievously so far, to shut down certain sites, the actions have brought to question what damage could be inflicted by real cybercriminals.

The Worst Case Scenario

Whilst the Mirai October attacks were relatively harmless and only resulted in some websites crashing, some tech commentators are regarding it as a test-run. It’s concerning that the next botnet attack could be aimed at data theft or physical asset disruption.

As Krebs stated in his blog “These weapons can be wielded by anyone – with any motivation – who’s willing to expend a modicum of time and effort to learn the basic principles of its operation.” Someone with a grievance against a particular website could easily have it taken offline or simply employ a hacker to do it for them.

It’s especially concerning to imagine the consequences of IoT devices being hacked within critical or high security areas such as hospitals, banking, government, transport etc. Time will tell if we are able to secure IoT before we are subject to further, and perhaps more significant, botnet attacks.

What Can Be Done?

How can individuals and organisations improve their IoT security and prevent cyber attacks? We’ve put together a quick checklist to help you strengthen your security.

  • Use strong login passwords for all your devices and strong Wi-Fi passwords. A strong password contains upper and lower case letters, numbers and symbols.
  • Make sure all the software you use is fully updates – this can fix security flaws.
  • Don’t open mysterious email links or attachments – if you weren’t expecting it, don’t open it!
  • Never reveal card information.
  • Don’t trust anyone who calls you to discuss your computer or devices – hang up the phone.

What do you think about the IoT security risks? Should CPOs halt their investments and wait for the cybersecurity to catch up with the technology? Let us know in the comments below.

Here’s what else has been going on in the world of procurement this week…

Trump Kills TPP

  • President Trump upended America’s bipartisan trade policy on Monday as he formally abandoned the ambitious, 12-nation Trans-Pacific Partnership.
  • In doing so, he demonstrated that he would not follow old rules, effectively discarding longstanding Republican orthodoxy that expanding global trade was good for the world and America.
  • Although the Trans-Pacific Partnership had not been approved by Congress, Mr. Trump’s decision to withdraw carries broad geopolitical implications in a fast-growing region.
  • Trump said American workers would be protected against competition from low-wage countries like Vietnam and Malaysia, also parties to the deal.

Read More on New York Times

Wal-Mart Cuts 1,000 HQ Jobs

  • Wal-Mart Stores began a round of some 1,000 layoffs at its corporate headquarters, with most cuts targeting the retailer’s supply chain operations.
  • The shakeups, which have been expected, suggest that Wal-Mart is willing to undo much of the work in its existing e-commerce operations in favour of Jet’s signature pricing and fulfilment algorithms, which reward shoppers in real time with savings on items purchased and shipped together.
  • The dent in its supply chain ranks could undermine one of Wal-Mart’s core strengths: its highly efficient brick-and-mortar-based distribution system.

Read More on Retail Dive

Samsung’s Exploding Galaxy Note7 Blamed on Battery Suppliers

  • Approximately 2.5 million phones have been recalled by Samsung due to explosive defects of the Galaxy Note since September 2016.
  • Recalls happen all the time, but while the Samsung case rose to infamy due to its flammable and potentially injurious nature, the revelation that Samsung’s primary and backup suppliers independently produced a faulty phone component is equally remarkable.
  • What was a supply chain problem was resolved by an operations solution in this particular case. However, batteries will be subject to more strict quality controls to avoid future issues.
  • Previous analyses also have suggested Samsung’s rush to production — both before and after the first recall — may have also impacted the finished good’s quality.

Read More on Supply Chain Dive

Procurement Salaries On The UP In 2017

  • Procurement professionals can expect to see pay rises averaging 10% in 2017, according to a salary survey
  • However, contractors will get the biggest rises – 15% – while permanent staff can expect to get 4%
  • Sam Walters, associate director at Robert Walters, said: “Across all levels of seniority we have seen demand grow for high quality procurement professionals over the past year, with those with IT procurement experience being particularly highly sought after

Read more at Supply Management

Meet The New General Secretary of Globalisation

Chinese President Xi Jinping claims world leadership for globalisation while the U.S. moves towards protectionism.

AFP PHOTO / POOL / Billy H.C. KWOK

Chinese President Xi Jinping used his address at the World Economic Forum in Switzerland last week to defend globalisation and criticise the rise of protectionism in Western economies.

The speech is the latest in a series of appearances on the world stage where Xi has sought to support the existing economic order that has fuelled decades of unprecedented growth in China. Similar appearances include Xi’s address to the United Nations in 2015, hosting the G20 Summit in 2016 and his speech at the Asia-Pacific Economic Cooperation Summit in Peru in November last year.

De facto Chinese leadership?

With the Trans-Pacific Partnership scheduled for the chopping block when President Obama steps down, Xi now has the opportunity to shape global economic systems to China’s benefit and step into an apparent vacuum for worldwide economic leadership, particularly where free trade and globalisation are concerned. In many ways, the world is now witnessing the situation Obama sought to avoid with his “Pivot to Asia”, designed to maintain American influence in the East.

In a commentary following Xi’s speech, the China Daily referred to the country as now being “the one major power with a global outlook”. “Ready or not, China has become the de facto world leader seeking to maintain an open global economy and battle climate change. In effect, President Xi has become the general secretary of globalisation.”

Xi’s Defence of Globalisation

“There is no point in blaming economic globalisation for the world’s problems because that is simply not the case,” Xi said. “And that will not help to solve the problems.” The problems Xi is referring to are those often referenced by Western populists across the U.S. and Europe, including growing wealth gaps and domestic unemployment related to offshoring. Xi’s speech touched on some of the deeper causes of sluggish world growth, looking to reinforce confidence in global development.

“Protectionism is like locking yourself in a dark room, which would seem to escape wind and rain, but also block out the sunshine,” Xi told the Forum. “No one is a winner in a trade war.” Xi announced that China has no intention to devalue its currency to boost competitiveness, despite ongoing criticism on this point from the new U.S. President.

Can globalisation function without the U.S.?

Despite the nation’s ongoing economic slowdown, the World Economic Forum estimates that China accounted for almost 39% of global growth last year. President Trump’s protectionist tariffs, along with his retreat from trade deals and climate pacts are likely to slow growth further. A similar level of concern is building in India, where the $150 billion outsourcing industry is under threat.

As WorldPost Editor-in-chief Nathan Gardel writes, “The optimal arrangement for making globalisation work is for the U.S. and China to join together as “indispensable partners” based on a convergence of interests to create a world order that works for all. If the world’s two largest economies, though from distinct civilizational spheres, don’t buy in, it won’t work for anyone.”

Read more Huffington Post 

 In other procurement  news…

Britain to purchase 60 trains for HS2

  • Procurement of a fleet of up to 60 High Speed 2 (HS2) trains was officially launched on Friday by Britain’s state secretary for transport.
  • HS2 is a planned high-speed railway in the United Kingdom linking London, Birmingham, the East Midlands, Leeds, Sheffield and Manchester. It would be the second high-speed rail line in Britain, after HS1 which connects London to the Channel Tunnel.
  • The contract has an estimated value of £2.75bn and is due to be awarded by the end of 2019. The overall projected project cost of HS2 is £56bn.

Read more at the Birmingham Mail

GM announces $1 billion investment in U.S. based manufacturing plants

  • GM will invest $1 billion in its existing manufacturing plants, creating or retaining nearly 7,000 domestic jobs.
  • The announcement comes after President Trump criticised GM and other automakers for building vehicles in Mexico and shipping them to the U.S., including a Tweet threatening to tax GM for importing the Chevrolet Cruze.
  • GM’s targeted areas of growth include its subsidiary, GM Financial, and advanced technology divisions.

Read more at Investopedia 

Meals on Robot Wheels

  • Autonomous robot manufacturer Starship Technologies has signed deals with meal delivery companies Postmates and DoorDash to deliver lunches in Washington and San Francisco, beginning in February.
  • The robots are able to autonomously navigate sidewalks and traffic conditions, while customers track their progress via an app as they make the delivery.
  • Each robot weighs approximately 18 kg and can carry three filled shopping bags, while travelling at speeds of 6.5 kilometres per hour.

Read more at CIO 

What Would You Do If The President-Elect Criticised Your Supply Chain?

Major US organisations are starting to rethink their manufacturing strategies for fear of being labelled “un-American” by the President-Elect. 

Every US-based supply manager with outsourced supply chains should follow Donald Trump on Twitter. Why? Because for major companies with overseas manufacturing operations, there’s every chance that the President-Elect will label your organisation “un-American”.

Since November 2016, Trump has criticised companies including Ford, Toyota, GM, United Tech and, more recently, pharmaceutical organisations including Johnson & Johnson, Pfizer and Bristol-Myers for moving U.S. jobs abroad. His focus appears to be on companies outsourcing to Mexico and China, where historically low-cost labour enables organisations to manufacture their products at a competitive level.

Companies changing plans

According to a report from Reuters, boards of a number of U.S. companies that manufacture overseas have directed their public relations teams to plan a response in case the President-Elect singles them out on Twitter.

Similarly, some companies are reportedly re-thinking mergers and other moves that would involve outsourcing to China for fear of being cast as “anti-American” by the President-Elect. Ford has backed away from plans to build a $1.6 billion plant in Mexico, while United Tech has announced plans to keep half of the 2,100 jobs it was shifting over the border. Reports have also emerged of dozens of major organisations contacting government relations and PR advisors to assess if they have any “red flags” that would draw Trump’s attention and lead to a damaging Tweet being sent.

New risk metric: weighing national interest

According to the Reuters report, “corporate leaders can no longer focus only on maximising shareholder value; they must now also weigh national interest.” Essentially, being labelled as un-American has become a new risk metric that needs to be weighed against the cost benefits of overseas manufacturing.

Trump’s aggressive rhetoric against China may also lead to a reduction of outsourcing to the manufacturing powerhouse as the relationship between the two countries is expected to decline. Trump has also flagged high tariffs as another way in which he plans to move manufacturing jobs from China back to the U.S.

The effects of a Trump Tweet cannot be downplayed. Lockheed Martin lost $4 billion in value as share prices feel immediately after Trump criticised the organisation on Twitter, while Toyota saw $1.2 billion in value wiped in five minutes following a similar Tweet. Developers have even created an App to alert investors to Trump’s market-moving Tweets. This week, the nine biggest pharmaceutical companies that use manufacturing plants in Europe, Asia and Africa lost roughly $24.6 billion in 20 minutes during a news conference in which Trump singled out the industry.

Alongside potential losses in share value, coming under fire from the soon-to-be President puts organisations at risk of brand damage and consumer boycotts.

It is unclear whether Trump will continue to use Twitter to drive his “Made in America” agenda, or use more traditional tools to affect change such as policies and import tariffs.

What do you think about “Made in America”? Are organisations right to be wary of a tweet from Trump?  Let us know in the comments below. 

We’ve kept one eye on the news headlines from around the world this week…

Proliferation of “non-human workers” accelerates

  • Amazon reportedly placed 15,000 robots across 20 fulfillment centres in 2016, increasing its machine workforce by 50%.
  • Similarly, iPhone manufacturer Foxconn has replaced 60,000 Chinese employees with robots, while Wal-Mart is automating up to 7000 jobs, including roles in the accounting and invoicing departments.
  • In the U.S. alone, up to five million jobs are expected to be replaced by robots by 2020.

Read more at Supply Chain Dive 

Blood supply chain faces an uncertain future

  • Due to changes in medical practices, hospital demand for blood has been dropping steadily for the past decade.
  • The strong supply and weak demand for blood has led to a 10 percent drop in the cost of a unit of red blood cells in the US, with overall revenue for the blood banking industry dropping to US$1.5 billion per year in 2014, down from $5 billion in 2008.
  • S. blood banks are expected to lose 12,000 jobs in the next few years, or roughly a quarter of its workforce.

Read more at  The Conversation

 

Flying Warehouses & Fashion Buyouts – Amazon Dominates Headlines

No sooner had 2017 started than Amazon appeared in the news in a big way. From flying warehouses, to buyouts of fashion chains, no-one dominates the headlines quite like the online giant.

flying warehouse
Image: Amazon

Disruption. It was a buzzword of 2016, and even if the word is falling out of favour, the activity looks set to continue this year. And the company at the forefront (again) of this disruption is Amazon.

The online giant has proven time and again it’s not content to rest on it laurels. So when the company appeared across the news headlines for a variety of reasons, you might not have been surprised. However, when you consider the headlines it was making, you might think again.

Flying Warehouses – The New Reality

Many companies will consider the cost of new facilities to meet demand trends in their strategies. Amazon, however, appear to have bypassed the real estate question with their proposed flying warehouse.

The company submitted patents late in 2016 for these warehouses, which would be serviced by a fleet of drones. The purpose of the “airborne fulfilment centre” would be to visit spectator-heavy events (think music festivals, sports events) where they could sell in-demand goods.

Analytics firm, CB Insights, were responsible for finding the flying warehouse patent, originally filed in 2014.  Additional patents serve to outline other plans in line with the warehouses too. These include a fleet of shuttles to keep warehouses stocked, the creation of an interconnected network of drones, as well as docking stations for drones to allow them to be picked up by the shuttles.

A diagram from Amazon’s patent (image courtesy of South China Morning Post)

The idea might sound a touch fantastical, but there are serious potential benefits that Amazon could realise. Not only would it save Amazon money in building warehouses, but it would also save on energy costs. Drones would be able to glide down to deliveries before being picked up.

Add to this using the airships as flying billboards, and Amazon could sell advertising space above some of the world’s biggest events.

This could represent a huge step change in the retail environment, with Amazon at the forefront. And you wouldn’t bet against them making it a reality. After all, it wasn’t long ago they completed the first drone delivery – something people dismissed when the idea was first proposed.

The Fastest Fashion of All?

It’s not just logistics and warehousing that Amazon are interested in disrupting either. There are strong rumours in the USA that Amazon are set to purchase American Apparel out of bankruptcy.

The clothing retailer went into bankruptcy in November for a second time. Now, with bids submitted late last week, it is suggested that Amazon might come out victorious. The move would fall in line with Amazon’s strategy to add to it’s nascent fashion arm.

The buyout would help to protect 4,500 jobs in America, and allow them to access American Apparel’s 100 plus stores across the country. It could also give Amazon a political boost following heavy criticism of its practices from President-elect Donald Trump.

Throughout his Presidential campaign, Trump criticised Amazon (amongst others) over its tax payments and business model. However, by purchasing American Apparel and maintaining its ‘Made in America’ promise, it’s thought that it may help smooth tensions between the company and the future President.

Technology Trends

Finally, Amazon has also been making headlines in the technology world. Even without attending the CES gadget show in Las Vegas, Amazon is making its presence felt.

Not only is Amazon’s ‘Alexa‘ AI assistant gaining in popularity, it’s also the chosen system for many other companies. Prominent companies, including Ford, LG, and Lenovo have all opted for Alexa as the AI interface in some of their products.

Increasing number of products are integrating voice commands, and Amazon’s decision to release an Alexa developer kit last year appear to be paying off. The company is seen as the early mover in this space, and looks set to continue its dominance over its rivals.

Even if there is still potential for glitches in the system delivering unwelcome surprises!

Do you think Amazon will make its flying warehouses a reality? Is this the next step in retail? Let us know in the comments below.

With the new year flying past, we’ve saved you some time by searching out this week’s top headlines…

Tesla’s Gigafactory Begins Mass Production of Battery Cells

  • In partnership with Panasonic, Tesla has begun producing lithium-ion battery cells for energy storage products and the Model 3 vehicle.
  • The Gigafactory is being built in phases, with manufacturing beginning inside finished sections. It is expected to be the largest building in the world when completed.
  • The current structure is only 30 per cent complete, yet houses 4.9 million square feet of operational space.
  • Tesla anticipates cost reductions through increasing automation, process design, locating most manufacturing processes under one roof and economies of scale.  

Read more on the Tesla website

Trump “Personally Involved” in Procurement Decisions

  • An analysis of Donald Trump’s campaign promises and policies has revealed that he is unlikely to make significant changes to U.S. Defence procurement policy.
  • However, he will seek to be personally involved in the negotiation of major acquisitions.
  • The President-elect tweeted about cost overruns of the Lockheed Martin F-35 fighter jet, and encouraged Boeing to compete with its F-18 Super Hornet.
  • Trump’s focus appears to be on technology that is immediately available rather than future research and development, and leans towards Airforce and Navy investment rather than Army.

Read more at Defense News 

Top Supply Chain Universities Ranked in U.S.

  • SCM World has released the results of a survey ranking the top institutions for Supply Chain courses in the U.S.
  • Practitioners were asked to list their top three institutions that are “markers of supply chain talent”,
  • The top five places went to: Michigan State University; Western Michigan University; Massachusetts Institute of Technology; Penn State University; and Arizona State University.
  • Connection to industry, through practical education and internships, was also flagged as an important factor in the results.

Read more at Forbes

Apple Removes New York Times from App Store

  • Apple has removed the New York Times App from its Chinese app store, in compliance with a request from the Chinese Government.
  • The Chinese Government began blocking the NYT website after a series of articles on then Prime Minister, Wen Jiabao, in 2012.
  • An Apple spokesperson stated the reason for the removal was “that the app is in violation of local regulations”.
  • Both Apple and Chinese authorities declined to comment on what regulations had been violated, or if the app would reappear in the future.

Read more at the New York Times