Apple, Google and Tesla are being sued over the deaths of children working in cobalt mines © Corbis/Getty Images
Apple, Google and Tesla are being sued over the deaths of children working in cobalt mines © Corbis/Getty Images

News review of 2019 part two

Will Green is news editor of Supply Management
30 December 2019

We’ve rounded up the most popular and important news articles of the year on SM.

Here’s part two, covering July to December. You can see part one here.

July

Deliveroo announced a Food Procurement scheme to simplify purchasing processes for restaurants and generate savings.

It said it would use its scale and existing partnerships with both suppliers and restaurants to negotiate deals on ingredients, packaging and cleaning products.

The scheme, trialled in the UK for a year, was claimed to have saved restaurants over 20% on their food bills and up to 40% on individual ingredients such as avocados.

The scheme was due to be live by the end of the year in the UK, Spain, France and the UAE.

An innovative approach to selecting a supplier for a solar and battery installation propelled oil well operator Santos to victory in the CIPS Australasia Supply Management Awards 2019.

The winners were announced at the Park Hyatt Melbourne during the CIPS Australasia Conference.

Santos had decided to replace the diesel generators powering pumps at its 208 oil wells in the remote Cooper Basin in outback South Australia and South West Queensland with solar cells and batteries.

The generators consume 8.1m litres of diesel and cause emissions, making a solar approach a potentially economical and eco-friendly option.

And another winner, Intel Corp, claimed victory in the CIPS Supply Management Asia Awards 2019.

A project to rationalise marketing services at the company saw Intel claim Best Process Improvement Initiative and overall winner at the awards, which took place at the Amara Sanctuary Resort Sentosa in Singapore in partnership with ProcureCon Asia.

The One Agency Model project achieved savings of more than $2m in the first year and saw a 14-fold reduction in the retail marketing supplier base across 12 countries in Asia Pacific and Japan.

The work involved standardising production and delivery of in-store point-of-sales merchandise, with locally relevant messaging across more than 5,000 retail stores. Suppliers were developed to be fully accountable for driving cost efficiencies, improving operational velocity and reducing legal risks for Intel.

August

The construction sector was urged to adopt a new competency framework for procurement professionals to put safety above price following the Grenfell Tower disaster.

“Poor commercial practices” resulted in a culture in procurement that prioritised time and cost over quality and safety risks, said a report.

Requirements set out in the new framework, drawn up by a working group chaired by CIPS, aim to change this behaviour across the procurement process and within supply chains.

Duncan Brock, group director at CIPS and chair of the procurement working group, said: “We know that profit margins throughout the construction industry are low and with high levels of competition there is a real concern that the culture of low prices and undercutting of competitors will continue.

“A balanced approach to decision-making at every stage of the sourcing, contracting and contract management process is needed.”

The Raising The Bar report, by the Steering Group on Competence for Building a Safer Future, addressed competency failings set out in Dame Judith Hackitt’s post-Grenfell review.

This was the month when McDonald’s UK admitted its paper straws could not be recycled because the infrastructure was not yet in place. 

An internal McDonald’s memo advised staff to dispose of the paper straws in general waste, even though they are manufactured from 100% recyclable materials, The Sun reported. The straws were reportedly too thick to be recycled.

The restaurant chain, which uses 1.8m straws a day just in the UK, said that while they had quickly moved from plastic to paper straws to meet consumer demand, “the infrastructure needed to recycle has not kept pace”.

And, while procurement problems with prestige projects like the F35 fighter jet made big political waves in Washington DC, the city’s auditor took aim at a smaller target – a toilet.

The Office of the Inspector General for the Washington Metropolitan Area Transit Authority (WMATA) system, known as the Metro, rapped the authority for contract mismanagement.

This came after WMATA was estimated to have spent $500,000 maintaining a single self-cleaning toilet located at the Huntington Metro Station.

The toilet, incidentally, had been out of service since the autumn of 2017.

September

The Ellen MacArthur Foundation (EMF) warned that a circular economy approach was required in combination with renewable energy to meet net-zero emissions by 2050.

Renewable energy is able to account for a 55% reduction in greenhouse gas emissions, but the remaining 45%, generated by manufacturing everyday consumables, was being “overlooked”, said the EMF.

A report outlined practical solutions through adopting the circular economy across production of cement, plastics, steel, aluminium, and food, which could cut 9.3bn tonnes of emissions.

In more renewable energy news, Google bought 1,600 megawatts of capacity in the world’s largest corporate procurement of renewable energy

Google purchased a package of agreements, including 18 new energy deals for projects around the world. The firm was buying capacity in North Carolina, South Carolina, and Texas to double the capacity of its global solar portfolio.

And, attacks on two Saudi Aramco facilities “effectively eliminated” the world’s spare oil capacity.

Oil prices briefly surged to above $71.95 a barrel following the strike, which resulted in the loss of 5.7m barrels, representing half the oil company’s daily output.

Aramco’s crude-processing facility in Abqaiq and oil field in Khurais were targeted by 10 unmanned aerial vehicles. The oil destroyed represented up to 5% of global daily oil production. Combatants in the conflict in Yemen claimed responsibility for the attacks but fingers were pointed at Iran.

When Rolls-Royce set its itself the bold target of becoming the world’s leading technology company it needed a supply chain worthy of the title. Its solution to this conundrum earned it overall winner award in the CIPS Supply Management Awards 2019.

With an additional goal of improving its cash position by £1bn and making Rolls-Royce the customer of choice for its suppliers, the company realised it required an approach to procurement that was also bold.

While for many years it had reaped the benefits of category management, year-on-year value improvement at the company had slowed.

Rolls-Royce decided that deeper collaboration with its supply chain could significantly increase the benefits to both itself and its suppliers.

October

Controversy erupted over the award of a US defense contract to Microsoft with allegations president Donald Trump intervened in the procurement process.

The Joint Enterprise Defense Infrastructure (JEDI) contract, worth $10bn, involves the collection and storage of sensitive military data in the cloud for use on the battlefield.

In court papers challenging the award of the contract by the Department of Defense, Amazon Web Services (AWS) claimed critical evaluation criteria were “inexplicably disregarded” and AWS’s offer was “mischaracterised” to “give the false appearance of technical parity between AWS and Microsoft”.

“The government procurement process – through which hundreds of billions of taxpayer dollars are awarded each year to provide essential government services, including to our nation's military – demands objective and even-handed administration based on facts and fair comparisons, not personal animus and undue influence,” said AWS.

The papers added: “Throughout the final year of the multi-year award process, the president of the United States and commander in chief of our military used his power to ‘screw Amazon’ out of the JEDI contract as part of his highly public personal vendetta against [Jeff] Bezos, Amazon, and the Washington Post [which is owned by Bezos].”

It was not a good month for three UK construction firms who were fined a total of £36m by the competition watchdog for price fixing concrete drainage pipes.

An investigation by the Competition and Markets Authority (CMA) found Stanton Bonna Concrete, CPM Group and FP McCann had been “sharing the market by allocating customers and regularly exchanging competitively sensitive information”.

The firms sold pre-cast concrete products such as drainage pipes often used in roads, railways or water management projects. Customers included engineering and construction companies, utilities providers, and local and national governments across the UK.

In a more positive news story, global commercial real estate firm JLL described how it standardised and streamlined its procurement function across 80 countries to increase performance and reduce costs.

As part of a digital transformation begun in 2015, JLL was able to improve how the firm operates regionally and within different business units by consolidating data and communications in areas such as sourcing and contract management.

The Fortune 500 company, with an annual turnover of $16.3bn, said a priority was to utilise technology to bring some “consistency and standardisation in the way the procurement function was working across the business”.

Speaking to Supply Management this month, Nikki Rowbottom, head of supply chain management at the British Library, said that procurement should focus on relationship management to add value to organisations, rather than purely buying.

Rowbottom said there had been a focus on procurement rather than contract management within the public sector over the last decade. 

She said: “You have to buy stuff to make your business work but you don't necessarily have to manage the contract. The majority of contracts tend to muddle along OK but when things go wrong, it’s just horrendous. 

“Procurement has generally improved because there’s been so much focus on it but there hasn’t been as much emphasis on contract management. I think contract management is actually more important than the procurement itself.”

November

The UK’s largest housing association explained how building strong relationships was key to maintaining long-term quality-based contracts and securing savings.

Peter Nourse, director of assets at housing association Clarion Housing Group, told delegates at the Homes 2019 conference in London the firm had recently concluded a large-scale procurement exercise that resulted in the award of three 20-year contracts to build and maintain homes. 

“We made some really key decisions at the start. We decided that this procurement wasn't going to be a big bang approach. We spend £130m a year and to start the process again from scratch would have put us at risk. We identified our two best performing contractors and extended those contracts by five years,” he explained.  

“We did a residual procurement for the remaining three regions in the country and took the deliberate decision to make these contracts a 20-year arrangement. I think that's quite unique.

E-commerce and delivery management firm Whistl described how it turned away from a category management structure in procurement.

Gareth Hughes, procurement and property director at Whistl, said category management was not right for the company because more flexibility was needed in the team, and a project-based approach was more appropriate.

He told SM a procurement transformation began three years ago, following a management buy-out of the UK arm of Dutch mail delivery firm Post NL, involving a “major restructuring of the department from category-led procurement to a programme-led structure”.

He said: “The category manager model doesn't work for us as a business. Previously, we've been organised on a kind of category management basis. We had to almost spin that on its head and say, ‘The business doesn't really need category management, it needs delivery where it matters’.” 

The Deloitte Global CPO Survey 2019 revealed that trade wars, Brexit, the threat of a global downturn and the growth of “mega suppliers” have put procurement increasingly on the defensive over the past year.

Deloitte found that more than 60% of firms have seen increases in procurement risk as previous norms of global trade are challenged through changing pacts and tariffs and worries about a new economic downturn.

The survey canvassed 481 procurement leaders from 38 countries, representing organisations with a combined annual turnover of $5tn.

The top risks for organisations was downturn/deflation (42%), internal complexity of organisations (39%), managing complexity within mega suppliers (37%) and trade wars (33%).

The threat posed by mega suppliers, which have emerged “as a byproduct of years of strategic sourcing and industry consolidation”, was named as “the real supply risk surprise”.

“It is in all of our supply chains and anybody who says: ‘There is absolutely no modern slavery in my supply chain, full stop’, is lying. It's out there. Our job is to go find and fix.”

This was the battle cry from Chris Harrop, group sustainability and marketing director at Marshalls, who has been working at the paving and landscaping materials firm for the past 17 years, 15 of them spent fighting modern slavery.

Speaking at the CIPS UK Conference, Harrop highlighted that just 23% of 7,500 eligible UK companies were deemed to have met the legal requirement in terms of compliance with the Modern Slavery Act, according to the Modern Slavery Registry.

He called on procurement professionals to take charge against modern slavery in supply chains and go beyond the Act’s minimum requirements, which state that every company turning over more than £36m a year is bound by law to annually publish a modern slavery statement on their website.

“All of us have a massive responsibility to address the 136,000 in modern slavery in the UK, and all of the supply chain issues overseas as well. We have a moral, legal and a corporate reputational need to do that,” said Harrop.

December

Marks & Spencer hired Paul Babbs from Adidas to be its new chief supply chain officer as it worked to revitalise its clothing arm.

Babbs is set to join M&S’s clothing and home division next spring. He joined Adidas in 2007 and has been its chief supply chain officer since July 2017.

M&S’s former clothing and home supply chain and logistics director Gordon Mowat left in September after two years in the role, while former managing director of clothing and home Jill MacDonald left the company in July.

In July it was announced that group chief executive Steve Rowe would head up the clothing and home supply chain programme at M&S. Rowe explained how a failed jeans promotion in February had led to the “worst availability” he had seen in his life. 

This month, Apple revealed it had bought its first “commercial batch” of aluminium which was produced without any direct carbon dioxide emissions. The aluminium was made by Elysis, a joint venture (JV) between Rio Tinto and Alcoa. 

The JV, facilitated by Apple last year, received a total of C$188m in funding from the two firms, Apple, and the governments of Quebec and Canada.

Elysis uses carbon-free aluminium smelting to eliminate all direct greenhouse gas emissions from the process, producing pure oxygen instead. The technology could reduce the environmental footprint of the aluminium industry on a global scale, the firm said. 

And a CIPS survey found more than two-thirds (68%) of UK supply chain managers believed company boards should be held legally responsible for payment terms.

The survey of 817 supply chain managers also found 16% believed most UK invoices were paid late. Just 5% said all invoices were paid promptly.

Almost two-thirds (64%) believed government moves to ban serial late payers from bidding for public contracts would reduce the problem but “no company has yet been singled out and the supply chain profession believes the government will have to stand by their threat to make a tangible difference to payment culture in the UK”, said CIPS.

The second news item featuring Apple is less positive, with tech firms Apple, Google, Dell, Microsoft and Tesla being accused of “knowingly benefiting” from child labour in cobalt supply chains

International Rights Advocates, a non-profit that provides legal support, filed a federal class action lawsuit on behalf of 14 families from the Democratic Republic of Congo (DRC) with children who were either killed or seriously injured mining for cobalt.

According to the complaint, filed in the US, child cobalt miners as young as six years old are working in “exceedingly harsh, hazardous, and toxic conditions”.

The complaint accused the tech firms of “knowingly benefiting from and aiding and abetting the cruel and brutal use of young children in DRC to mine cobalt”.

“The supply chain is, by design, hidden and secretive to allow all participants to profit from cheap cobalt mined under extremely hazardous conditions by desperate children forced to perform extremely hazardous labor without safety equipment of any kind,” it said. 

The demand for cobalt, which is a key component in rechargeable lithium-ion batteries used in electric cars, laptops and smartphones, has tripled in the last five years and is expected to double again by 2020.

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