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Global CEO blog

Welcome to the Global CEO (UK) blog. Its aim is to draw attention to developments and ideas in the world of procurement and supply management and in the work of the profession’s Institute.

We change the blog monthly, and I would welcome your comments personally on ceoblog@cips.org

David Noble FCIPS

What goes up must come down
The volatility of the global economic markets is still keeping us on our toes.  Just as we are lulled into a false sense of near-security, there are always a few surprises in store.
The worst global recession for a generation appears to be receding into history but it’s a patchy recovery. Though Germany is soaring ahead, France is still stagnating and Chinese manufacturing growth has dropped for three months now. This is the background landscape in which supply chains are operating. Add political, environmental and social factors and it’s a capricious and unpredictable mix.
But data shows that risks to supply chains are actually falling.  This is certainly the result of our findings in Q2 of the CIPS Risk Index (CRI) published this week. For the first time in 18 months, the level of global risk has actually decreased. It is a truth universally acknowledged in our profession and now increasingly amongst governments and businesses that the vulnerability of supply chains is increasing and the number and intensity of the problems are multiplying
So, to see that risk has actually decreased is an attention-grabbing development that deserves further investigation. The index has measured risk decreasing for three consecutive quarters since the financial crisis began in 2007. It tracks all the impacts of economic, political and social factors and showed a fall to 78.1 in Q2 this year, compared to the high of 82.4 in Q3 of 2013. The stability in sub-Saharan Africa appears to have been instrumental in the reduction of risk, along with Kuwait’s achievements in infrastructure projects bringing a level of security in the Middle East which still remains one of the most troubled regions in the world.
So though the immediate future for supply chains may be promising, there are possible storms ahead. No one is yet certain how the Ebola crisis will pan out. Could there be a pandemic on the horizon along the lines of the flu crisis a few years ago and will the war of sanctions between East and West with Russia at its core, tip the balance back into instability. As global recovery is taking hold, there may soon be stagnation and further threats to supply chain health, if these fears become a reality.Catch up with my column in Supply Management magazine

What now for government outsourcing?

How must it feel to lose £500m of your company’s value within minutes of announcing a profit warning? Quite devastating I’d imagine. Being plunged into the realisation that not only are profits disappointing but you’re losing the trust and faith of your investors too is a dire situation.
 
But this is exactly the position Serco finds itself in. As the UK Government services provider responsible for a range of services from prisoner tagging to London bikes, their fourth profit warning in a row should send a chill through us all reliant on public services. The company has had £1.5billion wiped from its balance sheets this month and its total value is set at only £1.7billion. In March of this year, profits had already dropped by 60% amidst investigations from the Serious Fraud office resulting in a ban on any more Government contracts while the investigations took place.
 
The company is big. Employing around 120,000 people in 30 countries around the globe, and this is its fourth profit warning in a row. Perhaps a victim of its own rapid expansion and success over 25 years has resulted in such scandals as overcharging taxpayers for prisoner tagging and escorting, demonstrating quite clearly that proper due diligence hasn’t been exercised.
 
So reliant has the Government been on Serco that 25% of its contracts have been held with the company.  So this latest debacle is a further
embarrassment for the Government too; especially when they have taken great pains to tighten up procurement processes and take a commercial approach to supplier management which has resulted in some grumbling from Serco themselves on their treatment. 
 
Serco’s situation is devastating for us too. The debate still rages around whether public services should be given to private firms following the failure of G4S to supply sufficient security staff for London 2012. So this latest development won’t win any plaudits for Government or for private firms themselves bidding for public service work and makes us ordinary taxpayers a little uneasy about the quality of these important services.
 
Chartered Status and name change
I am really pleased to announce that Her Majesty’s Privy Council has agreed the recently proposed changes to CIPS Charter and Bye-Laws.
This means that we can now change the Institute’s name to The Chartered Institute of Procurement & Supply and from January 2015 CIPS can offer Chartered Procurement and Supply Professional Status for suitably qualified and experienced members.
 
This announcement comes after a long period of consultation where we spoke not only to the global membership, with surveys and in-depth discussions on social media, we also took the views of a wide range of other stakeholders such as CIPS Congress, the Global Board of Trustees as well as businesses and other professional bodies.
 
MCIPS will remain our benchmark membership grade and the professional licence and FCIPS the highest grade of membership, but what Chartered Status will offer our members is an opportunity to enhance their lifelong learning and demonstrate their commitment to developments in the profession.