I feel like I’ve written a lot about Chris Lynch’s speech at the Big Ideas Summit, but the Rio Tinto CFO’s keynote was packed with useful information and provided some great ‘outsiders’ perspectives on what procurement, as a function, is capable of.
So… I’m going to bring up one more point he raised (I promise this will be the last).
Chris recounts the story of when his company was faced with the challenging situation of a monopoly supplier. The supplier was critical to his organisation’s operations and ultimately, its success. There was no one else in the market that could possibly do the job this supplier did and the supplier knew this. A competitive bid was impossible, the price was set high and the room to negotiate was almost non-existent.
If you can’t beat them, be them
That was until the procurement team came up with the innovative idea of creating what Chris called a virtual competitor.
Chris goes on to detail the steps the team took to drive this initiative; an initiative Chris stresses, was conceived and driven by ‘procurement and procurement only’.
Essentially, Rio Tinto called the monopoly supplier’s bluff. Rio Tinto’s procurement operations put together a team and tasked them with determining the cost of creating a new business that could produce the exact product the monopoly supplier was providing them.
Their efforts were meticulous from end-to-end. Raw materials costs were calculated, as was the cost of fabrication and warehousing. The team built a full end-to-end supply chain and cost structure for this good (all conceptual of course).
Now you know where you stand
By undertaking this process, Rio Tinto got a real understanding of what a ‘fair price’ might be for the product they required. But more than that, they sent a stern message to the monopoly supplier that they’d done their research and if need’s be, they could make arrangements to begin producing the product themselves.
This obviously brought the supplier back to the negotiating table and put some real competitive tension back into a relationship that had previously been very one sided.
Obviously, this is not a move that can be done by every business. Rio’s size, access to resources and the strategic importance of this particular contract made the project possible. But it does highlight that when faced with a seemingly unsolvable situation, empowering your people to think outside the box can produce real tangible results for your business. These are the sorts of innovative approaches I’d love to see more of in the procurement space.
If there is one comment at conferences that kills me it’s the old “we work in siloed organisations” argument. How many times have we heard this? Your boss, conference speakers, the pages of the Harvard Business Review and countless business ‘self help’ books have discussed and debated this phrase ad nauseum.
To be honest, I’m over it. Someone mentions silos, everyone agrees they are bad, then, in the same gasp of breath, we move back into talking about how we can strengthen procurement’s image within the business (often at the expense of another function) or we start a debate over which metrics best represent our existence as a function and the silos we just outlined as problematic are further reinforced.
Hopefully procurement will be gone in 2030
My cynicism aside, I did hear something at the Procurious Big Ideas Summit last week that gave me some hope. When asked about where he thought procurement would be in 2030, Chris Lynch, the CFO of Rio Tinto said… Gone (as in it will no longer exist). The crowd of largely procurement professionals raised a collective eyebrow.
Chris went on to highlight that functions (or silos as we so often refer to them as) are not necessarily be the ideal way to drive change and innovation in an organisation (particularly one as large as Rio Tinto). He even went so far as to suggest that large organisation may even stifle innovation and stressed the need for intrapenuers to break down these barriers.
Chris’s comments, along with a few other sound bites I took away from the day got me thinking about traditional organisational structures and how unproductive they are.
It’s not about delivering procurement value. It’s about getting stuff done
We’ve all had that feeling at work when know something could be done better, a process improved, a step removed, whatever it may be. But more often than not, internal bureaucracy and politics end up shutting these ideas down before they ever get legs.
Our current organisational structures require workers with improvement ideas to first speak to their manager (who is normally busy with myriad other tasks) about the problem. Once the manager is convinced it’s a good idea, we proceed up the chain to achieve the required consensus. This process is slow, time consuming and ultimately disengaging, it’s easier just to let the idea die than to jump through the requisite hoops.
The ideas that actually make it through this arduous process are not necessarily the best business ideas either. They tend to be the best procurement/<insert function here> ideas. Our consensus gathering and approval processes mean that ideas are reviewed and processed through a procurement lens. We ask ourselves ‘will this initiative be good for the procurement function?’ (or more cynically, will this initiative help me achieve my KPIs) rather than ‘are we fixing something that IS broken or are we developing a revolutionary new idea?’
How often have good business ideas been stifled because it’s “not within procurement’s remit” or “this is going to shake the boat with the finance team”?
I’ve been going to procurement conferences for more than a decade now and I’ve heard the endless argument about how everyone forgets about procurement’s value and how no one understands how good we can be. But are we creating a rod for our own back? When will procurement stop solving ‘procurement problems’ and start getting stuff done?
Who cares where good ideas come from?
Chris Lynch’s insights hint that there is hope in this sphere, he said, he doesn’t care where good ideas come from, procurement, finance, operations, who cares? A good idea is a good idea and we should act on good ideas.
Perhaps a flatter organisation structure (not dissimilar to what we’re seeing in the tech and start-up space) is the answer.
To me, a flatter functionless business (or least a business with less functional hierarchy) could empower staff by giving them more autonomy to act decisively. Autonomy to act spreads leadership throughout the business and removes the culture of protecting your (or procurement’s) patch from a business.
We need to remember we ARE working towards company goals, not procurement goals and ultimately the way we serve our customers, not our bosses, is the mark of a strong business. Maybe cross-functional teams are the answer today but, in support of Chris Lynch’s idea, I’d like to hope that no-functional teams are not too far off.
Communication is a critical component of any business and is no less crucial in supplier relationships.
Thanks to Spendrix for granting Procurious permission to republish this article. This article kicks off a series on how to identify various types of supplier risk.
When your company has great communication with suppliers, it can be like adding another department to your organization. There are a large number of suppliers who do an excellent job communicating with their customers. You probably have several suppliers you can think of now that practice excellent communication. What is it that sets these suppliers apart?
First, better communication leads to more efficient business practices. This can be seen in being able to respond to customers quickly and with thorough information. Also, suppliers that communicate well understand your company’s objectives, and how their business fits into these objectives. As you know, when a supplier has these traits, errors related to communication issues are much less common.
Unfortunately, there are a number of suppliers that are not as transparent with their customers as they ought to be. This break down in supplier communication can introduce various risk factors into your supply chain. The question then becomes, ‘how can you spot risk in supplier communication?’
The Details Simply Don’t Align
You may have a contact you normally deal with when working with a supplier. This is the person you go to with new jobs, or when you have any questions to clear up. However, what happens when your contact provides you with inaccurate information?
For example, your contact may have quoted a new job at a certain rate, but the official documentation says otherwise. Another example may be stating that a truck is in transit when the GPS tracking shows that the truck is stagnant at a truck stop.
Accidental or not, these mistakes slow down your business, cost you money, and damage that supplier’s relationship with your company. If mis-aligned details become a recurring problem, it’s probably time to find a new supplier.
Non-Responsive to Outreach
When you can not reach your supplier, or attempt reaching them multiple times without any follow-up on their part, you should start to be wary.
Does the supplier not value your business? Do they lack the man-power or technology to field incoming communications and respond accurately and promptly? More importantly, how will their delayed responses effect your company if something goes wrong during a job or you need a piece of vital information to relay back to your customer?
A delayed response could have devastating costs in situations like these. Overall, it is hard to put a lot of trust in non-responsive suppliers as you never know when you’ll hear from them next.
Won’t Answer Direct Questions
As you know, suppliers with great communication can be relied upon time and time again as valuable components of your company. Generally, you have a detailed knowledge of these suppliers, and trust the information they provide.
However, the same can’t be said for suppliers who routinely dodge difficult questions or provide you with answers that don’t get to the core of what you’re asking immediately.
Whether they aren’t actively listening during your conversations or simply don’t have the adequate industry knowledge to appropriately answer, these are major causes for concern.
Effective communication is a cornerstone of strong relationships between your company and suppliers. Such relationships, especially with strategic suppliers, are often collaborative, and both your business and your supplier’s business grow together.
Conversely, poor supplier relationships present a threat to your business; however, it is possible to hedge against supplier risk. By identifying supplier risk via their communication practices, you can work to eliminate these suppliers from your business or reduce their role in your supply chain.
Ben Goldwasser works as a Business Development Lead for Spendrix, an organisation specialising in supplier risk and quality analysis in shipping and logistics.
Fast food giant McDonald’s announced on Tuesday that the firm would take action to end deforestation across its supply chain operations.
The company detailed the following eight points as the cornerstone of its commitment to halting deforestation:
No deforestation of primary forests or areas of High Conservation Value,
No development of High Carbon Stock forest areas,
No development on peatlands, regardless of depth, and the utilization of best management practices for existing commodity production on peatlands,
Respect human rights,
Respect the right of all affected communities to give or withhold their free, prior and informed consent for plantation developments on land they own legally, communally or by custom,
Resolve land rights disputes through a balanced and transparent dispute resolution process,
Verify origin of raw material production and
Support smallholders, farmers, plantation owners and suppliers to comply with this commitment.
The commitment is expected to mean big changes within the company’s supply network, with more than 3,100 of the firms suppliers expected to be impacted by the new code.
Michele Banik-Rake, a sustainable agriculture expert at McDonalds, said that the initiative for the new code was actually driven largely by the firms supply base. “The question that was coming back to us was, ‘As suppliers, we have stronger commitments than you do as a company, so why don’t you make the same commitment?’ I couldn’t argue with that logic, right?” she said.
Questions have been raised as to where the responsibility for McDonald’s commitment to deforestation starts and ends. It’s one thing for McDonald’s to have a policy that impacts the firm’s direct suppliers, but perhaps the biggest challenge will come from ensuring that the third party plantations and farms that McDonald’s do not hold a direct relationship with will abide by these practices.
McDonald’s commitment to deforestation mirrors moves made by others in the fast food space recently including Krispy Kreme, Dunkin’ Donuts and Yum Brands. David McLaughlin, the vice president of agriculture at the World Wildlife Fund (who advised McDonald’s on its new commitment) was quoted as saying: “McDonald’s brings size and scale to the debate of sustainable sourcing. Their reach is large, they are global, they work closely with the suppliers and so this outreach can only help.”
45 years ago April 22 was just a normal average day… If it had been a colour, it would be grey. Unremarkable. Now it is forever marked in history as Earth Day – the original Earth Day occurred in 1970 and saw scores of people gather across the globe to show their support for greener policies.
Fast-forward to 2015 and more than 1 billion people from 192 countries have come together to build environmental democracy and to broaden, diversify and mobilise the environmental movement. Improvements in industrial development can be observed in corporate sustainability targets and the expansive range of sustainable products filling our shops and lining our cupboards. Yes, more companies are engaging with the issues firsthand – with the proposal of realistic goals, tangible progress is happily being achieved. The bottom line is now the Holy Trinity of people, profits AND planet.
If you happened to be in Washington last Friday you’ll have enjoyed Usher, Mary J. Blige, and Gwen Stefani (among others), performing at the free Global Citizen 2015 Earth Day rally hosted by rapper/entrepreneur will.i.am and journalist Soledad O’Brien. The event tied neatly in to the IMF/World Bank Spring Meetings – an early opportunity for world leaders to gather before they set the world’s sustainability agenda at the UN General Assembly in September.
The assembled throng counted world leaders and corporate innovators among its numbers – top of the agenda were rallying calls to end to extreme poverty and eliminate the threats posed by global climate change.
“Whether it’s the big migrations we expect to see or soil depletion or emptying the oceans, loss of species, loss of timberland — all these things are creating poverty at the same time that they are also creating climate change issues. Eliminating poverty will require solving climate change” – Kathleen Rogers, Earth Day Network president
The day saw a total of 33 commitments announced: education, water and sanitation, food security, health, political action, marine protection, and environmental awareness were all among them.
World Bank Group, President Jim Kim said:“Each person must do their part. We need engineers and entrepreneurs, we need doctors, we need lawyers, artists, teachers, we need students and activists – we need YOU. We are the first generation in human history with the opportunity to end extreme poverty.”
Also in attendance was the organiser of the very first Earth Day – Denis Hayes:“Climate justice is THE issue facing this generation. Ruthless, powerful carbon companies are buying votes and lying like the cigarette industry did for so long. So far, they are winning. The main power on the other side is you—you and billions of other people who actually care about tomorrow.”
A group of leading scientists and economists have added weight by issuing a chilling warning today – stating that three-quarters of known fossil fuel reserves must be kept in the ground if humanity is to avoid the worst effects of climate change.
Johan Rockström says: “It’s so frustrating, because it’s the choice of moving down a business-as-usual route with devastating outcomes for humanity and, at the same time, we have this almost unprecedented opportunity, we can transform the world economy to a fossil fuel-free one and moreover do it in a way that is security and health-wise more attractive.”
Turning Back The Clock
Steven Cohen, Executive Director of Columbia University’s Earth Institute– writing for The Huffington Post neatly summarises the challenges such an initiative needs to tackle head-on:
Sustainability is at or near the top of the modern global political agenda. At the core of that agenda is the need to:
Protect ecosystems and biodiversity;
Mitigate and adapt to climate change;
Protect and enhance water supply and quality;
Ensure adequate and healthy food;
Develop sustainable cities built with renewable energy and efficient transportation systems.
Reduce the impact of human-created waste on natural systems.
Develop businesses that minimize environmental impacts and maximize the use of renewable resources.
Steven notes: “We still have a lot to learn. We continue to extract and burn fossil fuels at a ferocious and destructive rate. The transition to a renewable resource based economy will be the theme of Earth Days for the next several decades. The institutional inertia and sunk costs of elements of the economy that depend on finite resources will not be easily addressed.”
Bob Langert, former Vice President of Sustainability, McDonald’s suggests that today’s society is in need of a reality check: “The consumer is less engaged today than in times past. We need a real surge to engage the consumer, or “sustainability” will be a niche that serves only a small segment of the marketplace.”
The 1990’s bought recycling to the fore but the enthusiasm (and novelty) soon wore off – and although recycling initiatives have become a part of modern society, the fervent desire once exhibited has now waned.
Bob continues: “While the consumer movement is quiet, the corporate environmental movement — including corporate collaborations with NGOs — is on fire. In 2005, Walmart worked with the EDF, Conservation International and others to put in place bold environmental goals, including zero waste. Similar actions and partnerships came from Unilever, Nestle, Nike, Coke, General Mills and General Electric, among others. For example, Coca-Cola has a “water neutral” goal. These aspirations, goals and progress are amazing.”
A Time For Change, Not For PR
Forbes notes that dozens of iconic US food, consumer and manufacturing giants (many of them Fortune 500 companies) such as Kellogg Co., Unilever, PepsiCo, Starbucks, Nestle, Mars, Gap Inc., L’Oreal, and Ben & Jerry’s will all be gathering on Capitol Hill to deliver a single, focused message to Congress.
Speaking to Forbes, Tim Brown, President and Chief Executive Officer – Nestlé Waters North America, said: “Nestle’s is directly impacted by the effects of climate change. Of particular concern are changes to weather patterns, water availability and agricultural productivity that will affect our global supply chain”.
And while many others will no doubt use the day to highlight their own sustainability plans and issue press releases – climate change is a challenge and not a business opportunity, and as such the developed world should not profit from disaster, according to India’s Environment Minister Prakash Javadekar.
Biggest Report Ever
Impeccable timing finds a newly-released report that details how sustainable production of bioenergy can be an important tool for addressing climate change.
Industry experts are calling the SCOPE Bioenergy & Sustainability Report the most comprehensive report on bioenergy ever released. It pulls together work from 137 researchers at 82 institutions in 24 countries that documents and analyzes impacts, benefits and constraints related to the global expansion of bioenergy.
It’s an age-old story of supply and demand… so on the eve of Record Store Day we’re bringing our record player out of storage, dusting off our favourite albums and learning why vinyl is here to stay…
In 2014 something extraordinary happened… UK album sales on vinyl climaxed at a 20-year high, following seven years of sustained growth (after even more years in the doldrums). Recently released figures from the Official Charts Company reveal that sales of vinyl LPs are continuing the trend in 2015– up a whole 69 per cent during the first quarter (compared to the same period in 2014).
Happily this has led to the creation of the Official Vinyl Albums Chart Top 40 and Official Vinyl Singles Chart Top 40 (combining sales of 7” and 12” singles) – musicians and retailers alike have welcomed the announcement with open arms, like UK vinyl retailer Phil Barton of Sister Ray Records, Soho, London:
“The resurgence in vinyl sales has been a great boost for the independent trade. The launch of the Official Vinyl Charts tells the world that a format that is loved and revered is more relevant now than ever – far from being a curiosity, vinyl is the go-to format for many music fans.”
So all signs are pointing to a resurgence of the once-beloved format, but do we have the infrastructure to keep up with the newfound surge in demand?
Back in Black (red, gold, green, and even white too…)
Vinyl LP sales stood at 1.4 million in 1995 (1.60 per cent of the UK album market) – in the years that followed sales dipped dramatically, finally reaching rock-bottom in 2007 with sales of just 205k (and a dismal market share of 0.10 per cent). With such a dismal performance it looked as though the beleaguered format had nowhere left to go – it was as good as dead…
But that hasn’t stopped those passionate and protective of the format from striving to restore the vinyl LP’s rightful place in our record collections – enter Record Store Day…
From its humble origins in the US, Record Store Day (or RSD for short) has since become a significant event in the musical calendar.
Megan Page , Communications and Marketing Assistant for the Entertainment Retailers Association, provides us with a potted history of Record Store Day and its origins.
“RSD is a celebration of the culture of independent record shops that aims to appeal not to just vinyl enthusiasts but also introduces a new generation to the joys of vinyl. Stores stock a range of exclusive product and host a range of events to celebrate.
“Record Store Day was conceived 9 years ago in the USA and was brought to the UK a year later. It’s now in its 8th year in the UK and co-ordinated by the Entertainment Retailers Association and Spencer Hickman. In 2014, over 220 independent record shops across the country signed up as labels produced over 270 exclusive album releases and 340 singles on vinyl. Now a global event, Record Store Day is celebrated in territories all over the world, including France, Germany, Netherlands and Spain.”
“…Watch the reverence they have as they handle their Beatles vinyl. How carefully they replace the albums into their sleeves, making sure they’re placed back onto the shelf in the proper sequence…”
Due to the complex logistics involved in such an initiative, orders are placed at the record factories as far back as December to ensure the production runs are completed in time. But park that thought for a bit, first we need to discuss vinyl’s phoenix-like rise from the flames…
I Am The Resurrection
During 2014 record sales hit a 20-year high – bolstered by the likes of Pink Floyd and Arctic Monkeys. But if we had to play Devil’s Advocate, is this all just a flash in the pan, a passing fad perhaps?
“It certainly helps having a big year of releases that would include Pink Floyd but from a personal point of view even the smallest of artists/fanbases can add their own mark on sales which keeps this trend continuing.”
Megan adds: “The growth of vinyl has been incredible and its sales figures reflect year on year growth. In 2014, vinyl album sales passed the 1million mark for the first time since the Britpop era. This is more than four times than the level as recently as 2008.”
We quizzed Martin on the factors that have contributed to vinyl’s return – what caused it to come back into fashion?
“Customers/consumers have always wanted something tangible and collectable. Vinyl is nice to look at, the artwork was really made for this format and you get a feeling of experiencing the record more.”
Earlier this year we also saw Neil Young weighing in on vinyl’s rise in popularity –Martin reckons that Neil Young had his own agenda to peddle here, commenting: “Very recently he’s launched a multi-million pound digital system (the PONO) that various people have already poked holes in, so that anything that deflects back onto vinyl helps his cause.”
We asked Megan whether there’s been a visible knock-on effect from such initiatives as RSD with record stores sales and vinyl releases?
“RSD itself has become such a popular initiative – sales of LPs alone last year generated more than £2m in retail for record stores. Because of its success, we are now seeing that not only heritage acts are releasing material on the format, but a new generation of artists such as Jake Bugg and the Arctic Monkeys are releasing music on vinyl. This also allows teenagers to discover the sound of vinyl of first time.”
Megan adds: “The great thing about the inclusion of bands like 1D and 5sos etc. is that for the first time it is recruiting a younger, female generation of music lovers to independent record shops who are discovering music on the vinyl format for the first time! Hopefully we’ll see more and more mainstream bands releasing material on vinyl too.”
Raging Against The Machine
Certainly on the strength of this you’d be forgiven for thinking that the future of the vinyl is as shiny as its glossy black exterior. However, it’s a different story behind the scenes, as aging factories are struggling to keep pace.
The Wall Street Journal reported that pressing plants (in the US) are being run flat-out to keep up with demand. And although there has been some investment in increasing capacity across Europe, more investment needs to be pumped into production facilities.
“The creaky machines that make them haven’t been manufactured for decades, and just one company supplies an estimated 90 per cent of the raw vinyl that the industry needs” – WSJ.
Chris Ruff, Marketing at Atlantic Records, thinks that there is a similar story in the UK: “Vinyl pressing time now is well over 8 weeks something that used to be almost half that. This is due to millions (literally) of repressing’s of classic albums.
“Depending on artist we usually do a pressing of 2k and then repress if any is needed. For reissues it is usually 5k… As a standard now for bands and indie acts we press all albums on vinyl.”
It’s not delays that have the potential to derail this creaky supply chain… The WSJ reports that record labels are sometimes waiting months for orders that used to be filled in mere weeks. In an effort to boost production, the machines are being run harder (and longer) than ever before, which is increasing the risk of break-downs – leaving record factories to foot hefty repair bills. The labour-intensive nature of the pressing process itself – the creation of the master record – all of these considerations pile on to the complicated, archaic procedure.
Chris sees the biggest obstacle will be trying to keep pressing in the UK (noting that Atlantic may look to Europe to press if they are quicker).
Such is the demand that factory owners are embarking on globetrotting voyages of discovery in order to procure scrapped presses. Paying anywhere in the region of £10-25k for the privilege – and that’s before adding the costs to transform them back into their previously (working) glory.
Placing increased pressure on plants when it comes to readying special (weird) releases. Limited runs of splatter, coloured, glow-in-the-dark, even scented vinyl means that invariably pressings take longer.
As a retailer Martin offers an alternative viewpoint when it comes to vinyl’s challenges:
“Pricing very much depends on how many of each album/single is pressed. This affects myself as retailer (the cost to me) and the customer (the cost to them). Moving forward we could certainly use more pressing plants in the world to ease delays!”
“I believe that the power of the record store to inspire is still alive and well, and that their importance to our next generation of musicians is crucial.” Dave Grohl – Foo Fighters frontman and ambassador of Record Store Day 2015
How an efficient supply chain can transform innovation on both the individual and industry levels.
Thanks to David Berry for granting Procurious permission to republish this article. David is a partner at the venture capital firm Flagship Ventures.
As a graduate student at MIT, I had the opportunity to work with Professors Robert Langer and Ram Sasisekharan in an environment rife with innovative thinking. We asked what could be possible, and were driven to pursue revolutionary technologies that were widely considered impossible. This experience instilled in me a simple but powerful credo: think big.
Innovation is difficult. If one is willing to traverse the boundary of the unknown, one should pursue the course that promises the greatest potential impact.
In exploring a wide range of subjects – energy, agriculture, medicine, and more – one approach has, in my experience, emerged as the most effective: begin with the end in mind. By identifying the problems and envisioning the preferred solution, one can define the set of constraints into which technological innovation fits, and establish a clear, albeit often difficult, path to its realization.
A fundamental requirement of this approach is an open mind, unconstrained by the subject’s idiosyncratic dogma. Those who are immersed in a field have an established view of what is possible, based on some combination of previous successes, citation bias, current limits of knowledge, and truth – and it is often difficult to distinguish these sources. But the newcomer asking the most basic questions begins to notice logical inconsistencies, from which the real constraints on solutions and technological limits arise.
Breakthroughs lie at the intersection of technological possibility and market pull. An understanding of these forces enables innovators to optimize the direction of invention. With well-defined constraints, a clear path for developing innovative technologies – one that accounts for both the known and the unknown – can be planned. This unconventional approach has consistently produced groundbreaking technologies that, if successfully implemented, revolutionize a field.
What might be more interesting, however, is the response that such progress often elicits: “This seems so obvious. Why hasn’t someone done it before?” Early in my career, this reaction troubled me; it made me wonder whether I had, in fact, overlooked something obvious. But, as my experience with entrepreneurial innovation has grown, I have realized that the response is rooted in the fact that most people are trapped in a specific doctrine, which obscures the innovative solutions that lie beyond its borders.
Companies exhibit similar behavior when it comes to acquiring innovative technologies, adhering to ineffective, restrictive processes, despite an ostensibly obvious alternative: the efficient systems that manufacturers use to secure inputs for production. In order to establish a clear, low-risk path to producing their goods at a predictable (and profitable) cost, companies employ teams dedicated to securing the relevant supply chains, controlling inventory, managing the production process, and so on – from the point of origin to the point of consumption.
In many cases, this involves maintaining relationships with a dedicated network of suppliers, with which producers share detailed product specifications. Doing so ensures that producers get exactly what they need, and that suppliers are able to deliver the correct inputs. The result is a well-defined, highly productive, and mutually beneficial working relationship.
By contrast, the innovation supply chain (the process by which companies obtain and/or develop future products and improve on their current products) tends to be characterized by inefficiency, ambiguity, and competition. And, in many cases, no supply chain is in place.
Most pharmaceutical companies, for example, lack effective innovation supply chains. But only about 15% of the drugs that the US Food and Drug Administration has approved recently were developed by the same company that markets and sells them, meaning that many major pharmaceutical companies depend on the innovation ecosystem to advance their products.
Drug companies often lament that the firms from which they are sourcing innovations do not perform clinical trials to their specifications, forcing them to repeat the work. Nevertheless, they are reticent about providing such specifications in advance – even when innovators request them – perhaps to protect their market position or internal efforts. Moreover, the same companies compete directly in the supply of innovative technologies. The result is a broken supply chain.
Just as individual innovators must challenge conventional wisdom, companies must replace the established approach to the innovation supply chain with one that more closely resembles how they create and maintain a manufacturing supply chain.
If market incumbents are willing to share “innovation specifications” (which should not be confused with innovation methods), they can develop an effective network of innovation suppliers, thereby increasing the reliability of the product-development engine. And, as with effective manufacturing supply chains, the supplier and the purchaser must build a reciprocal relationship, in which they do not compete with each other, practically or economically, in the specific activities that they are performing.
An efficient supply chain can transform innovation on both the individual and industry levels. Indeed, a common approach – defining key market needs, coupling them with solution constraints, and pushing the boundaries of current thinking – applies to all kinds of innovation. With an innovation ecosystem organized along these lines, “obvious” advances could occur significantly faster. How obvious is that?
Procurious has gathered 40+ of the biggest influencers in procurement and will be discussing innovation (among a host of other topics) at the Big Ideas Summit 2015 on 30 April. Join in, ask questions, watch exclusive video content, and contribute to all the discussions by RSVP’ing here.
Technology is not the be-all and end-all, so says Jon Hansen
For me, my discussions and corresponding interviews with Karen Evans, the former CIO for the U.S. Federal Government was powerful, in that it confirmed a position I have held since the late 90s . . . that technology in and of itself is largely irrelevant and ineffectual – at least in the traditional sense.
In the just released white paper titled “Transparency in Government Procurement” Karen Evans the former CIO for the U.S. Federal Government under the Bush Administration hit the proverbial nail on the head when she made the statement that “products” (re technology), does “not replace skill sets,” and that “vendors have to change their business models” focusing on the critical areas of “quality of service and reliability of data.”
Evans went on to suggest that this “change” is “different from selling an Oracle data base,” even if it is within the realms of a virtualized or “cloud computing” architecture, and that computing in the clouds is really just “optimizing the use of infrastructure” and is therefore a commodity versus being an actual service.
This entire post is quite revealing and worth reading today, especially given that it was at a very interesting point in time when the wave of change we are now experiencing was just beginning to create notable ripples.
It was a time when the industry first started to acknowledge that the 2000 SIIA white paper “Strategic Backgrounder: Software As A Service” actually existed, let alone that “packaged desktop and enterprise applications will soon be swept away by the tide of Web-based, outsourced products and services.”
Think of it in this context . . . the changes we are seeing today were identified in the late 90s, acknowledged in 2010, and acted upon in 2014.
In the end, what Evans did in the 2010 interview, was confirm that my advice prior to that time was on the mark, while creating a contextual tipping point for industry acceptance of what the handful of one time industry rebels had been advocating all along . . . that technology while important, is not by itself or mere implementation, the sole determining factor in enabling an organization to build a successful procurement practice.
Given the above, the greatest innovation that is transforming the supply chain has less to do with technology, and more to do with our way of thinking both within and outside of the procurement profession.
This last point regarding the transformative mindset referenced above was best captured by two-time Loeb Award finalist and Forbes contributor Francine McKenna who’s Twitter tagline reads “Using tools instead of tools using me.” @retheauditors
What’s your Big Idea? On 30 April, Procurious will host a world-first cost leadership think-tank at The Soho Hotel in London that will be amplified to our 4500 members across 100 countries through a mixture of videos, interviews, social media and feature-writing. Discover more at www.bigideassummit.com, join our Procurious group, and Tweet your Big Idea using #BigIdeas2015
Without a resilient communications system modern-day society would crawl to a halt. As technology has evolved so too have our businesses, commerce, transport systems, and media networks.
Today we’re taking a look at how people communicated before such modern enablers as email and the Internet. Starting with hieroglyphics and taking in everything from smoke signals, to television, radio, right up to the electronic messages of this modern age.
See how we learnt a thing or two from the American Indians and discover the perils of finding a message in a bottle.
The Egyptians used a kind of writing called Hieroglyphics. A hieroglyph used pictures to represent people, animals and objects. The origin of the word is Greek and its translation means sacred carving.
Ancient Egyptians wrote hieroglyphs on papyrus reed (an early form of paper if you will) and were also to be found carved into stone, often adorning the walls of tombs dedicated to their fallen.
The smoke signal is a form of visual communication required for relaying messages over a long distance. The signal is made by creating or interrupting a column of smoke. Its roots lie in ancient China where it was used by soldiers defending the Great Wall.
Tribes of American Indians each devised their own communication system – making their signals unique. Nowadays smoke is still used in Rome to indicate the appointment of a new Pope.
Message in a bottle
Made famous thanks to that song by The Police. The message in a bottle was once the oft idyllic and romantic notion of throwing a bottle into the sea, in the hope that one day someone discovers it washed up on a beach.
When English ships were under attack by the Spanish Armada, Elizabeth I relied on this form of communication to receive messages from her fleet. In fact it was considered so important she hired an official ‘Uncorker of Bottles’, should if anyone other than the post holder opened a bottle they would face an untimely end.
The postal service is the official system for collecting, conveying, and delivering letters and parcels to another place. Its roots lie in the relay system of the Persian empire. People on horseback could transfer written messages at one relay station to fresh carriers who could then transport it to another station.
The founding of The Post Office in 1635 transformed written communication and pioneered postal services. In the 1830s it was the first to issue adhesive stamps as proof of advance payment for mail.
Faster dissemination of news was made possible by the invention in Europe of movable type by the German printer Johann Gutenberg. Gutenberg is traditionally identified as the first European to print with hand-set type cast in moulds.
Carrier Pigeon is the name given to a breed of the common rock pigeon originally developed in England for its homing instincts. It was typically used for transporting messages, but over time has gradually lost its homing instincts.
They are most regaled for their work during World War I and World War II, where their bravery was awarded. Nowadays the humble homing pigeon continues the carrier’s work, proving that pigeon post isn’t just a load of old feathers.
Believe it or not but the origins of radio are not of this world. Radio is a system of communication using electromagnetic waves propagated through space. Despite its more popular leanings as a means of broadcast entertainment, radio waves can also be found in television, radar, telephone and space communication.
We cannot attribute the discovery of radio to one singular event, developments in the study of radio spiralled after Heinrich Rudolf Hertz discovered electrical waves. Then in 1896 an Italian inventor named Guglielmo Marconi transmitted a signal that exceeded 1.6 km (1 mi). In 1904 John Ambrose Fleming developed the first ever radio valve.
The first telephone capable of sending and receiving speech transmission was introduced and patented by a Scottish inventor named Alexander Graham Bell.
The science behind telecommunications involves the conversion of sound waves into electrical signals. In modern usage the telephone references a system which allows the sending of not only a user’s voice but also data, pictures, or any other information which can be encoded and converted into electrical energy.
Morse code is the original telegraph alphabet devised by the American inventor Samuel F. B. Morse.
It delivers messages via rhythm; a message is comprised of short and long elements that each represent letters, numerals and punctuation among other special characters. These are sometimes referred to as “dots” and “dashes” or “dits” and “dahs”. Morse code saw active use within the sea and naval community until 1999 when it was retired to make way for radio and satellite systems.
Sputnik 1 was launched by the USSR in 1957. It was the first in the line of early artificial satellites. Sputnik was essentially an aluminium sphere that ensconced a radio transmitter. The transmitter allowed itself to be tracked by sending signals back to Earth.
This pioneering early exploration paved the way for further communications satellites which have since graced us with modern-day telephony, satellite television, satellite internet and satellite navigational systems.
A facsimile transmission or fax is the electrical transmission of printed and written material, photographs, or drawings. Facsimile transmission is achieved by radio, telephone, or undersea cable.
Nowadays it is considered something of a dying breed; computers are now able to replicate the functions of the fax machine and with the advent of e-mail, the usefulness of fax could soon be made redundant.
Instant Message (IM)
We’ve come a long way since the transmission of the first message sent at 10.30PM on October 29 1969. The message was written by Charley Kline and supervised by UCLA Professor Leonard Kleinrock and consisted of the letters ‘lo’. The transmission was supposed to read ‘Login’ but due to a system crash only two letters made it through! The message was successfully resent an hour later.
The first email message was sent in 1971 by an engineer named Ray Tomlinson, one of the pioneers of the internet. He showed how a messaging facility that could be used by several users on a single computer could be extended so that it worked between a number of computers. Tomlinson decided that the @ sign should be used to designate the receiving machine, and so email as we know it was born.
Short message service (SMS)
SMS is a text messaging service that allows for the sending of messages up to 160 characters in length between mobile phones and pagers. Due to the length constraints texters compose their messages in text speak, or txt spk (note here the adaptation of the English language).
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There is movement at the top of the Coca-Cola procurement organisation.
The company announced earlier this week that Darlene Nicosia will take over the role of CPO of the Coca-Cola Company from Ronald Lewis who is moving into a new role as the senior vice president of Coca-Cola Enterprises (a subsidiary of the Coca-Cola Company). The changes will take effect on April 1st.
Speaking on the appointment of Nicosia, Ed Hays, who was recently named Coke’s next chief technical and innovation officer said:
“Darlene brings a deep understanding and appreciation of procurement strategy and execution within our Company and across our system. In her most recent role, Darlene was responsible for leading the procurement COE with a focus on capability development and execution of Global Sustainable Procurement’s Collaborative Procurement Model, and the implementation of Procure To Pay in collaboration with GBS.”
Ronald Lewis re-joins Coca-Cola enterprises having previously held roles as the organisation’s CPO and vice president of North American supply chain.
John Brock, CEO of Coca-Cola Enterprises, said: “Ron has an excellent track record of delivering results, extensive experience in the Coca-Cola bottling system, and an intimate understanding of the complexities of leading large supply chain operations in Europe and globally.”