Archive for January, 2009

A Hands-on Guide for Responsible Supply Chain Practices

January 30, 2009

Albeit there has been much talk about sustainable-, green-, CSR-driven, eco-, etc, supply chains in the past year, little has actually been disclosed what you can do – and where to start – when going about these matters.

Spawned out of an EU-initiative called European Alliance for CSR, the Portal for Responsible Supply Chain Management provides an excellent starting point – and site of reference/benchmarking – for anyone with an interest in CSR and its place in supply chain practices. The portal is a laboratory of sorts, lead by HP, Volkswagen, Titan and L’Oreal, and in the state their aim as:

The Responsible Supply Chain Laboratory does not mean to develop a top down standard for suppliers to comply with, but instead aims provide practitioners from large and small companies with practical information and materials to enhance their ownership and capabilities in the area of Sustainable Development and CSR, both within their company and among their suppliers.

I think it’s a great initiative and there are lots of great hands on information on the site for both buyers and sellers alike; for good reason; as this is one of the key issues at hand when it comes to making CSR work. CSR initiatives cannot be unilateral; they need to be inclusive to succeed and as a buying organization you need to be able to work with your suppliers in order for your supply chain to become truly sustainable. In all senses of the word.

Posted in green procurement, Supply Chain Management | 1 Comment »

Air Freight in Free Fall, Backing 22.6 percent in December 2008

January 29, 2009

Earlier today, The International Air Transport Association (IATA) released international scheduled traffic results for December 2008 (as well as the full year). And the results for December were not even close to what was expected.

“The 22.6% free fall in global cargo is unprecedented and shocking. There is no clearer description of the slowdown in world trade. Even in September 2001, when much of the global fleet was grounded, the decline was only 13.9%,” said Giovanni Bisignani, IATA’s Director General and CEO.”  Air cargo carries 35% of the value of goods traded internationally.

For the full year international cargo traffic was down 4.0 percent (as compared to the 4.3 percent growth of 2007). IATA accounts that the collapse in the airline industry’s freight business is a reflection of 20-30% declines in export and import volumes (which have been reported across Asia, North America and Europe).

In a forecast for 2009, IATA expect airlines/carriers to lose USD 2.5 billion and concluded that there is dire need form major structural changes to the industry. What this will mean to supply chain professionals is yet to be seen (Ariba’s Rachel Rutkoski recently posted on this subject on Supply Excellence), but ensuring that you’ve got your risks covered; especially when it comes to shipping/cargo/logistics; will be a must-do in everyone’s 2009 playbook.

Posted in Global trade, Logistics, Supply Chain Management | 1 Comment »

President Obama Pinpoints the Keys to Procurement Success

January 28, 2009

In his rather low-key (on the Obama-meter) inauguration address, President Obama was spot on when it comes down to procurement practices.

“…those of us who manage the public’s dollars will be held to account, to spend wisely, reform bad habits, and do our business in the light of day, because only then can we restore the vital trust between a people and their government…”

Taking out the fluff, President Obama is demanding that his government’s procurement practice is guided by three principles:

  • Spend wisely
  • Reform bad habits
  • Do our business in the light of day

Or in the words of a purchaser:

  • Do your spend analysis and act accordingly
  • Implement best practice processes
  • Increase spend transparency

Seems simple enough, yet in many areas of purchasing, much spend still flies under the radar. According to A.T. Kearney’s 2008 Assessment of Excellence in Procurement the top 5 percent (aka the Leaders) boast that they have 72 percent of their indirect spend under management, for the followers this number was a disappointing 42 percent. Since the leaders in this study are yielding overall spend related savings that are 2,3 times greater than their followers, not only are they outperforming their peers in the purchasing department, they are delivering a huge advantage in earnings per share versus their competitors, all accounting to getting more spend under management.

Growing up as a strong believer in smart suits, Vespa’s and the power of the crash chord I would offer this piece of advice to those that struggle with getting their spend under management (courtesy of UK mod revivalists The Secret Affair): “This is the time, this is the time for action”. Unfortunalty rock rarely speaks eloquently enough to be fitting in the board rooms, so one can borrow another of President Obama’s inaugural catch phrases:

All of this we can do. All of this we must do.

Posted in Business, Change Management, Procurement, Public procurement, Supply Chain Management | 1 Comment »

The Concerns of the CEO are the Concerns of the CPO

January 27, 2009

It’s been lying on my desk for quite a while now, but it wasn’t until recently that I actually took the time to dig into IBMs The Enterprise of the Future report. It’s an eighty page global CEO study that IBM performs bi-annually and it compiles answers from 1 130 CEO worldwide; and – from my northern European perspective – the best thing is that respondents are almost perfectly split in three – 33 percent being from Europe, 32 percent being from Asia and the remaining 34 percent from North and South America; so in contrast with many other so-called global reports, this one truly reflects the global CEO and the challenges global corporations are facing. One only needs to remember is that the answers were compiled during the first half of 2008 so the full pressure of the (down)fall of the global economy is probably not in the report.

Still, there are quite a few insights worth sharing.

I’m quite sure that we all agree that we are living in volatile times (in a “white-water world” as one of the respondents is quoted as saying) and topping the list of external/internal forces that keep the CEOs awake at night are:

  • Market Factors
  • People Skills
  • Technology Factors

While Market Factors and People Skills have been top priorities the last 4 years, Technology Factors have passed both Globalization and Regulatory Concerns in the CEO rating according to the report.

This should only come as good news to any CPO; managing a dynamic global market has put emphasis on two things for the purchasing function: success global sourcing is dependant on the proactive  purchasers with an analytical/collaborative bent (as opposed to the more traditional reactive/negotiation focus of yore) and tools that support cross-functional and increase the spend visibility across the enterprise. The concerns of the CEO are the concerns of the CPO, making it easier to align purchasing strategy to overall corporate strategy.

Posted in Business, Change Management, Global trade, Strategy | Leave a Comment »

Don’t Paint Yourself Into a Corner

January 26, 2009

There is great hope – and worry – that trade regulations will be one of the saviours – or accelerators, depending on your view – in this current downfall. An experienced purchaser will probably reduce the risk of either by ensuring a flexible supply chain that can deliver value in any case. Ensuring supply – at market prices, with the wanted quality – is after all a core aspect of purchasing. So why the need for flexibility.

British philosopher (slash anthropologist, slash author, slash semiotician, slash linguist etc) Gregory Bateson once suggested that civilizations will expire by the loss of flexibility, and that flexibility is automatically lost if not exercised.

To me the important passage here is the act of exercising your flexibility. It needs to be done, not just planned for. And in times like these, this is more important than ever. Locking yourself into long, rigid contracts or government induced trade regulations will – in the end – cause a new downfall.

Posted in Global trade | Leave a Comment »

Making Spend Analysis Come Alive

January 20, 2009

Most of us will agree that spend analysis and spend statistics are the fundamentals of any purchasing function. Yet we’re still dumbfounded when it comes to taking these statistics (if we even have them) and transforming them into something that’s communicable. We’ve touched upon this subject on numerous occasions and it’s a subject that has been written about on a number of blogs and publications.

Hans Rosling Presenting At TED

Most of the authors have focused on one key issue – making sure that purchasing is speaking a language that is understood by the c-level decision makers. I’d like to offer another piece of advice by sharing this fantastic Hans Rosling presentation (filmed for TED in February 2006). Hans Rosling is a professor of global health at Sweden’s Karolinska Institutet, focuses on dispelling common myths about the so-called developing world. In this presentation he presents statistics in a way I’ve never seen before using a piece of software called Gapminder (subsequently purchased by Google in March 2007 and now called iGoogle Motion Chart).

I can just imagine the results of a spend analysis run through this type of motion chart software – it can definitely explain story behind even the BASS:est spreadsheet hell.

Posted in Spend Analysis | 1 Comment »

The Hen or the Egg – The Race For Plug-In Power is on

January 19, 2009

A month ago Fortum – one of the leading power companies in the Nordic region launched their first recharging stations for plug in vehicles in Stockholm. To date four stations are active and the company plans for 100 to be installed by the end of 2009.

I pass one of these stations as I bike to work every day. It’s strategically located across the street from the city hall – something that seems to be the thing to do when setting up a new infrastructure, Coulomb Technologies just did the exact same thing when they unveiled their first charging station in San Jose a few weeks ago  and it’s going to be a thrill to see how this initiative will fare in the future.

From a supply chain perspective the interesting thing about this initiative is that Fortum (in the Stockholm region) is set on building a power infrastructure for a currently non-existent market (currently there are about 300 plug in vehicles registered in Sweden), banking on the automotive industry to start delivering plug-in cars for a mass market. According to reports from the Detroit Automotive show this will be a reality in a few years as almost all auto-manufacturers have at least one plug-in model set for release. In a classic egg or hen scenario it seems that the power grid will be in place before too many cars will be lining up for power.

The cool thing about many of the suppliers of plug-in stations is that they are almost to an end using existing parts – the Fortum recharging station is basically a modified engine pre-heating supply, something that’s been commercially available in the Nordic region for decades – to deliver a new service. The Coulomb solution used in San Jose utilizes existing light poles for its power supply.

The promise of a new generation of cars is already forming a new industry segment and from the look of it, none of the traditional fuel providers seem to be taking charge (no pun intended).

Posted in Uncategorized | Leave a Comment »

In a crisis you do what you must – Toyota to source Korean steel

January 16, 2009

After posting their first annual loss in 70 years, Toyota is about to break another (previously airtight) boundary by sourcing steel from Korea timesonline.co.uk reports:

Brokers described the gambit, which plays heavily on the current strength of the yen versus the Korean won, as a “scene-shifting” moment for corporate Japan and the cosy lattice of domestic-only relationships that date back many decades.

The move is expected to send shockwaves through the Asian automotive industry where only Japanese steel used to be seen as good enough for a Japanese car. And the favourable exchange rate may mean that other Japanese industries start looking westward to retain profitability.

It just goes to show that a crisis can be the real deal when it comes to bringing out the best of us and doing away with traditional – and outdated – practices.

Posted in Best Cost Country Sourcing, Global trade | Leave a Comment »

Sourcing marketing services as the window of opportunities close

January 15, 2009

A few months back, we highlighted some of the categories that were well suited for additional sourcing initiatives due to the financial downturn; one of the categories that we highlighted was marketing but as we all know nothing lasts forever.

Although marketing spend is down across the board; many marketing suppliers have been on their toes and adjusted their operations accordingly. Wise from the dot-com boom (crash) many advertising agencies have quickly adapted to the new era and are looking to the maturing internet marketing space to keep their revenues intact.

In a recent interview in Svenska Dagbladet (in Swedish); Göran Åkestam, founder and CEO of Åkestam Holst, one of Swedens largest advertising agencies is quoted saying:

“The (advertising) industry has become more cost aware. Rates have been lowered and we all had to get used to a different cost level. At the same time, many marketing functions have become more skilled, they are careful when cutting in marketing budgets since they know how fatal lack of sales are to their business.“

It goes to show that all categories have windows of opportunity that can be closed rather quickly. Whilst sourcing for marketing services still is viable; the quick feet of the (Swedish, in this case) advertising agencies have lessened the possibilities for easy savings. Acting now is hence of the essence.

Posted in Negotiation, Sourcing, Strategy | 1 Comment »

Even for those who excel, hard times can come quickly

January 12, 2009

After a long, long holiday break, Purchasing Transformation is back on track.

With the Detroit Auto Show in full swing, the auto manufacturers are out in force showing off their hopes to saving their industry, it’s sad to note that even the manufacturers that have been somewhat safe in the outskirts of the slowdown are experiencing external troubles.

When KIA Motors established their European plant in Zilina 2006 they aimed to create the most efficient automotive plant in the world. And looking at the results of 2008 the probability is rather high that they’ve succeed.

With everything running smoothly the plant spits out a new car every 60 seconds and production was increased by 38 percent in 2008. But what really impresses is the quality of the vehicles produced. KIA has nearly 300 quality controllers on the site and according to plant manager In-Kyu Bae only 35 percent of the funds budgeted for guarantee issues have been used, though hard to control, this figure points to great quality of the production.

Too bad then that KIA and their competitors in Slovakia have gotten caught in the middle of the Russian/EU gas-war and have announced that they need to shut down their plants for a few days due to power shortage.

Posted in Best Cost Country Sourcing, Risk Management | Leave a Comment »

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