April’s Procurement News Digest

  • Author: Carmen Molina
Posted on 17-05-2011

Procurement NewsT-Mobile and Orange to combine procurement activities.

Deutsche Telekom owners of T-Mobile and France Telecom-Orange will be working together to harmonise procurement practices, aiming to save €1.3 billion (£1.1 billion) in the process over the next three years.

According to Olaf Swantee, Executive Vice-President of Europe at France Telecom-Orange, “The new joint venture will offer a more efficient sourcing organisation that will lead to more effective partnerships with suppliers. This will enable us to drive innovation and shape the development of technology in a way that meets customers’ needs.”

Capitalcom recently placed France Telecom-Orange in the top 5 of their annual CSR rankings.

Balfour Beatty buys Power Efficiency

Power Efficiency, a consultancy that focuses on energy procurement and carbon strategy, has been bought by the infrastructure group in a move that aims to provide an end-to-end energy service. Research shows that this kind of service is increasingly in demand, according to Power Efficiency Managing Director, Bobby Collinson.

Balfour Beatty, having already announced plans to save £30 million in procurement, hopes to reduce their customers’ energy costs and carbon footprints in the process.

Mitsubishi selected as public sector supplier.

Buying Solutions, the UK government’s chief procurement agency, has awarded Mitsubishi a place as an official public sector vehicle supplier. The role will include supplying passenger cars, 4x4s and light-medium commercial vehicles to be distributed around the country for various public services including local authorities and the health sector.

This comes as the government is moving to centralise its approach to procurement – Buying Solutions is part of the Cabinet Office’s Efficiency and Reform Group.

“Our aim is to make the process of ordering a specialist vehicle simple and cost effective by removing much of the hassle from the fleet manager,” said Kate Woodward, Head of Corporate Sales for Mitsubishi Motors in the UK.

Government names John Collington as Chief Procurement Officer

John Collington, of the Cabinet Office Efficiency and Reform Group, has been appointed as Chief Procurement Officer for the government.

“This new role will allow John Collington to drive real transformation in government procurement, which in turn will realise significant savings for the taxpayer,” said Francis Maude MP, Cabinet Office minister.

Collington has been head of procurement in the Efficiency and Reform Group since September 2010, before which he was the Home Office group commercial director.

The Royal Wedding’s Carbon Footprint

The marriage of Prince William and Kate Middleton generated 12 times as much greenhouse gases as Buckingham Palace generates in a year. The 6,765 tonnes of carbon dioxide equivalents (CO2e) is equal to about 1,230 times the annual emissions of the average UK household.

Most of these emissions came from travel, including international guests flying from overseas, and the public transport use into central London on the day. The 400,000 people on the tube, as well as 200,000 people using national rail services generated 3,957 tonnes of the CO2e.

Prince Charles ensured that the wedding was as green as possible by using local produce for the food and renewable sources for the energy. However, the National Grid estimated that 600,000 people turned on their kettles after the balcony kiss at Buckingham Palace.

South Asia Region Public Procurement Forum Launched

Discussions on improving public procurement in South Asia have taken place in a new forum backed by the World Bank and the Asian Development Fund. It took place in Nepal over 3 days, and included representatives from 8 countries including Afghanistan, Sri Lanka and Pakistan.

Buying practices in Bhutan have left the country with supply chain difficulties, and have led to delays and even litigation. The forum hopes to build upon reforms in the region’s approach to public procurement, which is currently regulated by various methods ranging from guidelines in Bhutan, Maldives and Sri Lanka to procurement legislation in Nepal and Pakistan.

Chinese public procurement practice excludes Europe

The European Union Chamber of Commerce in China has claimed that public procurement practices in China have led to European business missing substantial opportunities. A recent study, entitled Public Procurement in China: European Business Experiences Competing for Public Contracts in China shows not only how public procurement in China has an estimated value of $1tn, but that European companies are barred from most of it, and that current regulation is badly laid out and poorly implemented.

Transparent and non-discriminatory regulation of this “enormous market”, according to European Chamber President Jacques de Boisséson, will “ultimately support the goal of higher quality growth”.

A trend towards decentralised information for tenders has led to higher costs and the unfair awarding of public procurements, where European expertise could have supported the Chinese government’s plans in areas such as transportation, civil engineering and renewable energy.

Kimberly-Clark’s procurement plans beat expectations by $50m

FORCE, the company’s procurement optimisation program, has made savings of $250m to $300m, where previous targets had been in the range of $200m to $250m.

While the company has been working against higher commodity prices and a generally more difficult business environment, savings are still being sought in sourcing and supply chain activities. Organic sales rose by more than 2% for the first quarter of 2011, contributing to an increase in net sales of 4% to $5.0bn.

Research points out importance of strategic sourcing

A new study by the Aberdeen Group has revealed that almost 60% of companies see strategic sourcing as a highly valuable part of their business. The research, entitled The State of Strategic Sourcing report, which looked at 315 organisations around the world, showed that, on average, a company loses 2.7% of savings to savings leakage.

Christopher Dwyer, research analyst for Aberdeen, said that this leakage problem “can be corrected by improving contract management processes and ensuring that spend analytics is linked to extracting intelligence within key financial metrics”.

Toyota hopes to normalise production by November

Toyota have stated that following the disruptions to their supply chain over the last six weeks, as a result of the Japanese earthquake and tsunami, the process of reaching normality by working closely with part suppliers will begin during July 2011. Their aim is to return to their normal production schedule at some point between November and December. However, it is still possible that this disruption will significantly impact upon Toyota’s business results over the coming months.

Sources of information:  purcon.com, Guardian.co.uk, Telegraph.co.uk, Supplymanagement.com and Procurementleaders.com

March’s Procurement News Digest

  • Author: Carmen Molina
Posted on 12-04-2011

Procurement NewsLong awaited UK anti-bribery law guidance

The UK Ministry Of Justice has finally issued guidance for applying the new anti-bribery act, which comes into force on July 1st. Firms have welcomed the Ministry of Justice’s guidance, according to The Guardian, with many saying it has lifted the threat of corporate hospitality falling foul of the new regulations. Ken Clarke, the justice secretary, said the legislation would “reinforce Britain’s reputation as a leader in the global fight against corruption”. Clarke added: “Addressing bribery is good for business because it creates the conditions for free markets to flourish.”

In the guidance, there is no exemption for “facilitation payments”, deemed to amount to a bribe. Gifts or tickets to sporting events and dinners are permitted as reflecting “good relations” with clients. Anti-corruption groups and lawyers said the UK government appears to have softened its stance on some elements including the geographical scope of the law.

Car makers struggle after Japan disaster

Toyota is struggling to source 500 types of car parts following the earthquake and tsunami that hit the north-east of Japan earlier this month. General Motors has also announced suspension of production at one its plants in the US, blaming parts shortages. Nissan too has reported supply chain ‘bottlenecks that its procurement teams are trying to control.

It comes as businesses across various industries report procurement challenges in the wake of the disaster as processing plants and energy facilities remain closed. Japan is a big supplier of key parts used in industries ranging from car manufacturing to consumer electronics and data processing. The problem will come in the middle of April when companies run out of inventories and supplies” Rajiv Biswas IHS Global Insight.

BT seeks to cut supply chain CO2 emissions

In a bid to reduce the carbon footprint of its operations BT has introduced a climate change procurement standard that will apply to all its suppliers. The scheme has been implemented to encourage suppliers to reduce carbon during the production, delivery, use and disposal of products and services supplied to BT.

The initiative includes three “minimum expectations” to be undertaken by all contracted suppliers. Firstly the supplier must demonstrate it has a policy in place to address the challenge of climate change. Secondly the supplier should be actively measuring and reporting carbon, as well as other relevant green house gas emissions. Finally, the supplier must have in place “challenging targets” to reduce emissions and is reporting on progress.

Liz Cross, BT CSR strategy and policy for procurement, said: “This is not something that we’re legally obliged to do, but we see this as key to delivering on our commitments on carbon reduction.”

Jaguar Land Rover looks to local sourcing

Jaguar Land Rover has awarded £2bn worth of supply contracts to UK companies in a move that will create up to 5,000 jobs. The news came as a welcome boost to western suppliers struggling against mounting competition from far-eastern, low-cost country suppliers.

A further boost to UK automotive suppliers came from a report compiled by the UK’s Automotive Council which claimed that a third of supply contracts lost by UK companies had gone to Western Europe, rather than the Far East and, as a result, could be won back.

Porsche drive procurement function to meet corporate goals

Porsche’s procurement function previously sat within the finance and business department. From April 2011, Uwe-Karsten Städter will be the company’s new board member in charge of purchasing. Since 2007, Städter has been head of electrics/electronics group procurement at Volkswagen.

Matthias Müller, chairman of the board of management, said: “Our purchasing volume is growing not only because of the current development of the economy but above all because of ambitious corporate goals which Porsche has defined for the forthcoming years. “Procurement will clearly have a greater weight in future.”

McDonalds sets out vision to eventually source sustainably

McDonalds wants its suppliers, “over time”, to only provide agricultural raw materials for its food and packaging from land that has been certified as sustainable by an external third-party evaluation process. Their Sustainable Land Management Commitment (SLMC) will first focus on the five areas it believes will make most impact: beef, poultry, coffee, palm oil and packaging.

Part of the initiative includes sponsorship of a three-year beef study to investigate carbon emissions on 350 beef farms across the UK and Ireland. McDonald’s is also joining the Roundtable on Sustainable Palm Oil (RSPO) and has committed to source only RSPO-certified Palm Oil by 2015.

Oil price rises hit metal prices

Fears of an oil supply shortage sparked by civil unrest in North Africa made the price of crude oil jump in the last week of February to over $100 a barrel (£62.40). A report published by OPEC said that if sustained for a long period, the recent surge in oil prices could slow global growth resulting in higher prices for industrial goods and technical services.

The changing oil price and subsequent supply disruptions impacted the cost of a variety of metals including aluminium, copper and gold – which all went up. The cost of precious metals increased as a result of their role as safe haven for investment in the middle of political uncertainty.

Despite all this, OPEC concluded the world economy was still enjoying a solid recovery with JP Morgan’s global Purchasing Managers’ Index reflecting this. The PMI moved above 57 index points in February, indicating expansion in the current quarter. In addition, manufacturing across many economies posted stronger growth in February, especially in the US, Europe and Japan.

Adidas kicks off five-year sustainability programme

Adidas has outlined its new environmental strategy, a five-year plan to reengineer its approach to environmental management; a strategy based on extending existing programmes to deliver process efficiencies from areas including product design, development and sourcing to logistics, own sites and IT systems.

“Implementing environmental performance across our value chain is an important step to deliver sustainable operations over the long term,” said Herbert Hainer, Adidas Group CEO.

As part of the strategy, which was published together with the Group’s 2010 Sustainability Report, the Adidas Group is committed to using 100% better cotton by 2018. “Our goal is to use 100% Better Cotton in our products by 2018 and we are excited to work closely with the Better Cotton Initiative towards achieving this ambitious goal.” Another initiative is called “Green Company”, which looks at the own sites of the Adidas Group.

Global IT procurement budgets set to increase

Worldwide commercial IT spend is forecast to total $3.6tn in 2011, a 5.6% increase from $3.4tn in 2010, according to market watchers. Gartner’s latest outlook has been raised slightly for 2011 from its previous forecast of 5.1% growth.

Gartner analysts said this stable forecast comes despite political unrest in the Middle East, while the impact on IT markets of the recent natural disasters in Japan is yet to be fully understood.

Gartner has added media tablets, such as the iPad, to its computing hardware spending estimates beginning this quarter. “The addition of media tablets, reinforced by an expected additional decline in the value of the dollar, accounts for the increase in top-line growth,” said Gordon.

Sources of information: procurementleaders.com, purcon.com, bbc.co.uk, spendmatters.com, Google News

Last month’s procurement news digest

  • Author: Carmen Molina
Posted on 03-09-2010

Procurement NewsEDF is trying to attract contractors for the Britain’s largest construction project

EDF Energy, a British subsidiary of Électricité de France, intents to build four new EPR reactors in the UK by 2025. EPR reactor is a new generation of nuclear plants, developed by Areva NP, Electricité de France (EDF), and Siemens AG. The arrangements for plants in Hinkley Point and Sizewell have already been made and hundreds of contractors will be involved. This project is going to be one of Britain’s largest construction projects.

EDF is holding an event on the 13th of September to highlight the company’s plans and talk to suppliers about opportunities available during this programme. “This is a long-term project and the opportunities are likely to be equally long term for those companies who take advantage of them,” said Alan Cumming, EDF Energy’s Head of Procurement.

General Motors recovery plans

It has been an eventful time for General Motors: after emerging from bankruptcy and receiving a substantial government bailout package, General Motors is now trying to get back on its feet. It has filed for an IPO with the S.E.C.

While GM is still a global behemoth (in the Year 2009: 7.5 million vehicles sold, which equals approx. 11.6 percent of worldwide vehicle sales) it suffers from the following problems:

- GM business model is built on volume, but global car sales have contracted due to the recessionary environment

- GM needs to tighten its supply chain as a lot of suppliers are themselves in financial difficulties and therefore try to pass-on their cost increases to GM

- GM with its high fixed cost base suffers under the competitive pressure from companies in India and China

- The company’s investments in R&D in green technologies are costly and a gamble as research might not yield many marketable ideas

- GM is highly dependent on the decisions made in Washington concerning fuel efficiency and greenhouse gas regulations

The procurement of Chinese telecommunication equipment was refused in Taiwan

Taiwan’s National Communications Commission (NCC), the Taiwanese regulatory body for the telecommunication and information sector, denied allegations that the refusal to allow Taiwanese companies the procurement of Chinese telecommunication equipment was politically motivated. According to NCC all procurement request are reviewed following the same guidelines.

Chinese telecommunication equipment is currently facing difficulties in various markets due to growing national security concerns. Whereas India has recently allowed the import of certain Chinese telecommunication equipment, in general the approval of procurement of Chinese technology seems to be handled on a case-by-case basis.

Santander banking group saved £63m in the supply chain

One of the world’s largest banks, Santander, has managed to reduce procurement cost by £63m, bringing it down to £617m for the first six months of 2010. The savings have become possible mostly due to the bank’s takeover of Alliance & Leicester and Bradford & Bingley and renegotiation of procurement contracts in the retail banking arm.

Cisco’s supply chain problems are likely to remain for the rest of the year

Despite narrowing margins for the second consecutive quarter, Cisco’s Q4 earnings have beaten Wall Street expectations. The strong performance of the Unified Computer Systems (UCS) segment has contributed to a profit growth of 79 percent y-o-y (year-on-year) and a revenue growth of 27 percent y-o-y.

Even though Cisco has successfully reduced the lead times of some of its suppliers, it still struggles with excess lead time in the supply chain. According to the CFO Frank Calderoni, this problem is likely to remain for the rest of 2010.

Toshiba plans to reduce its procurement cost

Toshiba, the Japanese electronics company, unveiled plans to reduce the procurement cost of electronic components by one trillion yen ($11.6bn) over the next three years through the help of overseas suppliers. This step is necessary due to the increased competition from Chinese and South Korean companies.

While Toshiba’s profit was positive during Q1 due to strong demand for memory chips as well as portable devices like smart phones, personal computers and flat-panel TV sets suffered strongly from the remaining Asian rivals.

BMW and Daimler partner to reduce purchase cost

The two companies already buy auto components and negotiate a better deal from their suppliers. According to BMW’s procurement chief, the estimated savings in 2012/2013 will be EUR100m. Herbert Diess, a President of BMW Motorrad, mentioned that this cooperation “will pay off over the years”. He also said that there is a possibility to further develop the partnership.

British farmers have issued warnings to their procurement partners

There is a potential beef crisis, which has been caused by low beef prices for an extended period during the last years which has forced many farmers to produce below their production cost. The Chairmen of the UK farming unions in Scotland, England, Wales and Ireland blame the low prices in the supermarkets for the problems and warn that unless there is a commitment to the UK supply chain, current quality cannot be ensured.


Sources of information: procurementleaders.com, purcon.com, bbc.co.uk, edfenergy.com, just-auto.com, smartplanet.com, toptechreviews.net, news.cnet.com