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

Time is running out for your CRC compliance

  • Author: Lucy d'Arville
Posted on 09-09-2010

The Carbon Reduction Commitment (CRC) Energy Efficiency Scheme, which requires organisations to measure, manage and report their emissions related to energy use, came into effect on 1 April 2010.

Current indications in the market are that a number of organisations are significantly behind in their preparations for CRC compliance. As of August 23, only a third of affected organisations had registered, according to Environment Agency figures. Registration closes on September 30, 2010.

There are three main areas where many companies are behind where they should be:

  • First, understanding whether they need to comply with the regulation. This has been driven either by confusion around the CRC rules or insufficient resources dedicated to compliance internally.
  • Second, correctly gathering the information needed for the CRC evidence pack and ensuring a transparent audit trail. Examples include identifying all half-hourly meters, completing the registration process, correctly collating information for the CRC evidence pack.
  • Third, registering to achieve the Early Action Metric for improved CRC League Table performance. This could drive significant financial benefits to an organisation equal to 10% of the total carbon allowances purchased.

With substantial penalties, including for example £5,000 which increases by £500 a day for a failure to register, the urgency of CRC compliance cannot be ignored.

We need greater collaboration on carbon reduction

  • Author: Lucy d'Arville
Posted on 23-03-2010

A source of supply chain risk that threatens to play a significant role in the near future is a supplier’s commitment to reducing carbon emissions. Only last month Wal-Mart, the world’s largest retailer, announced that it would cut 20 million metric tons of greenhouse gas emissions from its supply chain by the end of 2015 – the equivalent of removing more than 3.8 million cars from the road for a year.

To achieve such goals buyers across all sectors are starting to be tasked with finding suppliers that fall in line with their company’s policy on carbon reduction and are looking for suppliers that are active in monitoring and reducing their carbon footprints. This growing focus on the supply chain as a means to hitting carbon reduction targets is hardly surprising.

According to the McKinsey Global Institute Report 2008, ‘for consumer goods makers, high-tech players, and other manufacturers, between 40 and 60 per cent of a company’s carbon footprint resides upstream in its supply chain. For retailers, the figure can be 80 per cent. Therefore, any significant carbon-abatement activities will require collaboration with supply chain partners.’

Legislation is already pushing many organisations to think about their carbon usage. On the 1st April, five thousand companies in the UK will be affected by new legislation requiring all companies on half-hourly electric meters to register for the CRC Energy Efficiency Scheme, committing them to submit an information statement on their carbon usage.

Soon, the risk of carbon complacency may be one of the most significant for suppliers as buyers pursue a policy of reducing the carbon footprint of their supply chains.

However, suppliers, and buyers alike, are perplexed by the range of emerging standards, measurement techniques, reporting tools and management methods available and suppliers are challenged by the complexity of presenting varying data to many organisations.

Clearly, establishing an environment in which practical progress can be made requires a collaborative approach by an industry on a collective basis so that the challenges of interpretation and implementation can be clearly understood and used to develop best practice methodologies that may be shared throughout the community – research has already demonstrated the inaccuracy of ‘carbon calculators’ for instance. After all, it makes little sense for suppliers to work independently, each measuring in their own way and coming out with very different figures. By working together they can ensure that buyers are offered a true comparison and, what is more, the cost burden can be shared. But importantly, this process needs to be properly audited and suppliers certified to a common standard.

The utilities sector is leading the way in adopting a collaborative approach to this problem, working through the internationally recognised Certified Emissions Measurement and Reduction Scheme (CEMARS). It might be worth other sectors looking at collaborating in this way too.