© PAUL ELLIS/AFP via Getty Images
© PAUL ELLIS/AFP via Getty Images

News review of 2020 - part one

Will Green is news editor of Supply Management
24 December 2020

January

A new NHS procurement platform was launched as part of efforts to standardise purchasing in the health service.

The Edge4Health, developed by NHS Shared Business Services (NHS SBS) and tech firm Virtualstock, is a cloud-based consumer-style marketplace with almost 1m products.

Four NHS trusts went live with The Edge4Health, with 1,000 employees using the platform to buy thousands of goods and services each day, and the plan was to roll it out across the health service.

Meanwhile, Marks and Spencer said its results over Christmas 2019 were impacted by food waste and buying decisions in menswear.

M&S said like-for-like sales were down 2% against a background of “unprecedented discounting from competitors”.

Chief executive Steve Rowe said waste occurred in food categories where they “went for it” over Christmas and bought too much. They “got the balance wrong” in menswear in terms of sizes and styling, which was “more contemporary in styling fit”. Others said the trousers were too tight.

The Ministry of Defence was criticised for “poor management” of its nuclear weapons infrastructure programme, which led to delays and cost increases of £1.3bn.

Commercial and delivery issues in the “earlier, riskier” stages of projects impacted production schedules and led to overspend by 115%, according to the National Audit Office.

In a taste of things to come, the coronavirus pandemic came to attention after lockdowns in China’s key industrial hub of Hubei province disrupted carmakers.

Toyota, Honda, Peugeot Citröen, Volkswagen, General Motors and Ford halted operations, banned travel to mainland China, and returned employees and their families to home countries.

February

The procurement team at Sainsbury’s led a transformation programme that brought £90m in savings and helped foster a “cost-conscious culture”.

Speaking at the CIPS Best in Procurement event in London, the team explained how they delivered a transformational change programme resulting in 349 projects and £90m in savings. 

Orla Walshe, category manager of marketing, loyalty and data at Sainsbury’s, said the procurement team was restructured and tasked to “lead for commercial change and drive value at pace by challenging suppliers, stakeholders and ourselves to embrace a cost-conscious culture”.

Analysts warned supply chain operations had yet to return to normal in China following shutdowns and quarantines.

It had been expected that factories would return to normal after an extended shutdown for Chinese New Year, but closures were extended into March with experts warning: “A return to normal isn’t yet in sight.”

And Procter & Gamble warned around 17,600 products could be affected by the coronavirus.

P&G CFO Jon Moeller, speaking at the Consumer Analyst Group of New York conference in the US, said P&G used 387 suppliers across China, shipping more than 9,000 materials.

“Each of these suppliers faces their own challenges in resuming operations,” he said.

March

As the UK and many other countries entered lockdowns for the first time, procurement teams were found to be focusing on seven key actions to address business continuity.

A survey of organisations in Casme, a global membership network for corporate procurement, showed purchasing teams were “playing a vital role in managing the impact of the Covid-19 virus”.

Casme said it surveyed subscribers to “understand the actions currently being taken to minimise the impact of supply chain disruption”.

The seven areas were: mapping suppliers, sourcing protective equipment, identifying risky items, finding new suppliers, increasing stock levels, working from home, and cancelling meetings and travel.

At the same time, everyone in procurement appeared to have questions around force majeure and whether it applied in the pandemic.

David Lowe, partner at law firm Gowling WLG, told SM if a firm had been impacted by an event outside its control, contract laws in many countries included force majeure provisions that could help them to avoid liability. 

But Lowe said firms must communicate any supply issues to their customers and demonstrate they are trying to work around the issue, for example, sourcing supplies from an alternative factory. 

“If you cannot fulfil your customer contracts because your Chinese supplier cannot supply, you might be able to call force majeure but you will still need to try and source the components from an alternative supplier. You cannot sit on your hands and do nothing,” he warned. 

More details emerged of the procurement errors that contributed to the Grenfell disaster when the inquiry was told Studio E, the architecture firm behind Grenfell’s controversial renovation, manipulated fees in order to avoid an open tender

Bruce Sounes, the lead architect on the refurbishment of Grenfell Tower, told the inquiry fees had been deferred at the request of Kensington and Chelsea Tenant Management Organisation in order to avoid exceeding the OJEU threshold.

Under EU procurement rules, public sector contracts valued over a certain threshold must be put out to public tender across the bloc. 

April

The UK government launched a plan to distribute personal protective equipment (PPE) and secure future supplies for healthcare staff in response to the coronavirus pandemic.

A full 24/7 military operation was underway to deal with unprecedented global demand for PPE, including a new national network to manage supply and logistics.

The government said it was working alongside industry to boost future supply of critical PPE and a team had been set up to identify PPE suppliers across the globe.

Tesco said it had “completely reset” relationships with suppliers over the past five years and this helped the retailer cope with the coronavirus outbreak.

The supermarket said during the panic buying in March sales in the UK went up by around 30%, which “cleared the supply chain of certain items”, while the pandemic had added costs of up to £925m.

Chief executive Dave Lewis said work over the past five years involved “completely resetting our relationships with our suppliers”.

“These endeavours put us in a strong operational and financial position to deal with the challenges of Covid-19.”

Meanwhile companies across sectors launched support packages for vulnerable supply chain companies.

Unilever said it would provide €500m of cash flow relief for its most vulnerable SME suppliers and it committed to protect its workforce in the short-term from sudden drops in pay as a result of market disruption or being unable to perform their role.

Water company Severn Trent, Fast Retailing, Waitrose and Primark all made commitments to support their supply chains.

CIPS launched a dedicated coronavirus hub to offer support to procurement and supply chain professionals navigating the impact of Covid-19. 

May

The head of the Crown Commercial Service (CCS) outlined an ambition to take control of around £15bn of central government spend by putting the customer first.

Simon Tse, chief executive of CCS, told SM the organisation controlled about £10bn of central government spend on common goods and services but it had been calculated around £19bn was spent in these areas.

Tse, who had been with CCS for four years, the last two as chief executive, said the organisation had been on a transformation journey that revolved around putting the customer “at the heart” of decision-making, in order to draw in more spend to its frameworks.

Emma Waldron, risk, procurement and governance manager at the Welsh Council for Voluntary Action (WCVA), told SM the voluntary sector “should not be forgotten” as global demand for PPE soared. 

The WCVA, a membership body that supports the voluntary sector in Wales, works with organisations such as food banks, those dealing with domestic abuse and women’s aid, and alcohol and drug rehabilitation. 

“Understandably the focus is on the NHS and care homes. What I’ve been trying to do is to make sure these organisations [that WCVA supports] can still access the PPE they need in certain scenarios, such as gloves and masks,” she said.

The UK government introduced legislation that means suppliers will not be able to stop supplying a company that has entered insolvency.

Under the Corporate Insolvency and Governance Bill, termination clauses that engage on insolvency will be prohibited, “preventing suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process”.

Lawyers expressed alarm at the measure, telling SM there was a risk of supply chains becoming “characterised by a non-pay culture”.

The world’s largest container vessel, HMM Algeciras, was launched in South Korea in the midst of challenging times for the shipping industry.

The 24,000 20ft-equivalent-unit (TEU) containership launched at Daewoo Shipbuilding and Marine Engineering’s Okpo shipyard in Geoje.

HMM Algeciras, named after the Spanish port city, is the first of 12 24,000 TEU-class vessels scheduled to be delivered in 2020.

Measuring 400 metres, it is longer than the Empire State Building laid on its side.

June

The third annual list of the most influential people in procurement was unveiled by CIPS and Supply Management, in partnership with C2FO.

The CIPS Procurement Power List recognises leaders who are pushing procurement and supply chain strategy forward and making a positive contribution to the reputation of the profession.

The list included two new categories: ‘On the move’ for leaders who have recently changed jobs, and a ‘Champions of Change’ category celebrating CPOs who have taken on broader roles, have representation at company executive level and are leading on sustainability for their organisations.

Almost a quarter of councils in England reported fraud or corruption in procurement processes, according to a study.

A report into local government procurement fraud by the Ministry of Housing, Communities and Local Government found 23% of 86 councils experienced fraud or corruption in 2017-18, but said this was likely to be the tip of the iceberg.

The report estimated local authority fraud losses at between £275m and £2.75bn each year, but also referred to National Fraud Authority research from 2013 that put the figure at £876m. It said councils spent around £55bn a year on goods, works and services.

The report said adult social care and construction were areas of particular concern, “given the high level of spend and complexity of the supply chains involved”.

A survey revealed almost half (48%) of firms globally would overhaul their entire procurement and supply chain strategy in the case of a prolonged Covid-19 crisis.

The global survey of around 400 procurement, supply chain and operations executives – by consultancy Kearney in collaboration with the World Economic Forum – found 44% were adapting transportation methods to ensure continuity of supply while 40% were prioritising orders for critical facilities and vulnerable customers.

Meanwhile in a blog for SM, Dan Gibson, consultant at Procurement for Housing, said Covid-19 was speeding up change in procurement and public buyers must step forward and make the most of difficult times.

Fairtrade urged Nestlé to reconsider its decision to end a decade-long partnership of buying Fairtrade-certified cocoa for its KitKat brand. 

The move would mean a loss of almost £2m in Fairtrade premiums each year for co-operatives in Côte d’Ivoire, Fiji and Malawi, representing 27,000 small scale producers, Fairtrade said.

Click here for part two

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