The Suez Canal was blocked for six days in March © Suez Canal Authority
The Suez Canal was blocked for six days in March © Suez Canal Authority

News review of 2021 - part one

Will Green is news editor of Supply Management
24 December 2021

January

Public sector organisations in the UK were given the ability to reserve procurements for suppliers taking into account characteristics such as their location, size or whether they are social enterprises. A Procurement Policy Note said contracts for goods and services and works under certain thresholds would have additional freedoms to “tackle economic inequality, create new businesses, jobs and skills, as well as increasing supply chain resilience, encouraging entrepreneurship, and attracting new entrants to government markets”.

Early in the vaccine rollout industry experts warned capacity, packaging and storage would be key supply chain challenges. Meeting the UK government’s target – to deliver the first dose of a Covid vaccine to up to 15m of the most vulnerable people by mid-February – would require enough capacity to maintain a just-in-time supply chain in order to minimise the need for local storage.

Brexit continued to create uncertainty with predictions that prices for imported goods would rise by around 5-10% in July when the phased introduction of post-Brexit border controls was completed. Additional burdens were forecast for categories such as timber, electrical equipment, metals, chemicals, pharmaceuticals, computers and electronics, transport equipment (including automotive), and machinery and equipment due to rule of origin regulations. However, in the end this date was postponed with the bulk of controls now due to come into force on 1 January 2022.

Working from home during the pandemic was found to have caused productivity and morale problems in procurement teams. A survey by McKinsey found half of procurement leaders admitted productivity levels had fallen due to remote working setups, while 43% had seen a drop in team morale. The decline was due to poor efficiency and team coordination, said a report.

 

February

A UK government white paper announced procurement rules for healthcare services would be scrapped under proposed legislation to reform NHS England. In a paper on integration and innovation in health and social care, the Department of Health and Social Care (DHSC) said reforms would “give commissioners more discretion over when to use procurement processes to arrange services than at present, with proportionate checks and balances”.

An Oxford County Council parking contractor managed to overturn a procurement decision to award a contract to a competitor, forcing the council to pay out £1.6m. The council settled out of court with Marston Holdings after the company sued when it was not re-awarded a contract to carry out parking enforcement. Council lawyers identified “significant failings” in the procurement process.

Companies called on the government to address a “gaping hole” in the EU Brexit trade deal around rule of origin. In a letter to the government signed by hundreds of firms, Fashion Roundtable said products made from parts imported from non-EU countries, such as India, China and Turkey, didn’t qualify for the tariff-free access to the EU. Fashion Roundtable said the “Percy Pig problem” had left retailers facing unexpected customs duties of up to 12%.

 

March

The grounding of the 400m container ship Ever Given in the Suez Canal was expected to disrupt $40bn worth of trade. The ship, which blocked the canal for six days, was reported to have been caught in a gust of wind that swung the stern into the bank. The key route carries around 10% of global trade. The Suez Canal Authority originally sought compensation of $916m from the ship’s insurers, but a lower undisclosed figure was finally settled on.

Five common mistakes were identified that could impede the success of procurement professionals within their own organisations. These included not aligning with the company’s broader strategic vision and goals, and overpromising and under delivering while increasing bureaucracy. Mudit Kumar, VP, procurement and supply chain consulting at GEP, said global firms had accelerated investment in procurement functions to build resilience and flexibility and mitigate supplier risk, but the function risked making errors in adapting to the new reality.

Procurement professionals were told they would need to be “at the very heart” of a data revolution in the hospitality sector in response to customer demands and new UK law. “Natasha’s Law”, which came into effect on 1 October 2021, requires all caterers to provide full ingredient lists and allergen labelling on foods pre-packed for direct sale on the premises in England, Wales and Northern Ireland. The law followed the death of teenager Natasha Ednan-Laperou in 2016, who suffered a fatal anaphylactic reaction after eating a sandwich containing sesame seeds bought from Pret a Manger.

 

April

Clear purpose and role models throughout the organisation were revealed to have been crucial in increasing adoption of procurement technology at jewellers Bulgari. Jose Bustillo, sourcing excellence and procurement administrator at Bulgari, told delegates at Ivalua Now the introduction of new tech in 2018 resulted in 100 email queries a day, so they initiated a new change management model.

Supply chain executives were told expect questions from the CFO on data, resource allocation, and balancing conflicting expectations. A report from Deloitte said the coronavirus pandemic had elevated supply chain risk to a top priority for finance, with CFOs looking to implement “risk-adjusted cost optimisation”.

Research found supplier financial risk represented nearly half (48%) of all risk events recorded in 2020. Riskmethods, which monitors over 740,000 risk objects including suppliers, locations, ports, company sites and customer sites worldwide, said financial stability of suppliers, the largest category of risk facing global supply chains, grew from 41% of total risk in December 2019 to nearly 52% during the peak of the pandemic in early 2020. Force majeure claims, when a business says forces beyond its control prevented it fulfilling contracts, rose by 124% in 2020 year-on-year.

 

May

The Queen, in her speech outlining the government’s legislative agenda, said a new Procurement Bill would be introduced that would simplify purchasing in the public sector.

A consultation on the green paper on procurement reform had closed in March and the government was still analysing responses, but the bill was expected to be introduced “from September 2021”.

Driving operational efficiency” knocked “reducing costs” from top spot of CPO priorities for the first time in the 10-year history of an influential survey. Deloitte’s CPO Survey 2021 saw reducing costs pushed into second place, with digital transformation making up the top three priorities.

Controversy over pandemic procurement continued with a court being told large quantities of personal protective equipment (PPE) purchased by the UK government was “useless to the NHS”. The High Court in London heard campaign group the Good Law Project accuse the government of failing to apply basic technical steps and due diligence in the procurement process for PPE contracts which was “fundamentally not transparent, unequal and unfair”. The campaign group launched legal action, naming then health secretary Matt Hancock as the defendant, over what it said was a “breach of duties of transparency”, the establishment of a “VIP lane” for contracts, and the award of nine PPE contracts.

 

June

A Covid-19 outbreak in southern China threatened to cause fresh disruption for global supply chains as new lockdowns disrupted port services and delay deliveries. Authorities in Guangdong province shut down businesses to halt the spread, causing shipping delays in the ports of Shenzhen and Guangzhou, respectively the third and fifth busiest in the world. The move sent already high shipping rates rocketing.

Suppliers were told they publish a “Carbon Reduction Plan” detailing their commitment to achieving net zero by 2050 in order to bid on major UK government contracts. A Procurement Policy Note said large firms would be required to report some scope three emissions including “business travel, employee commuting, transportation, distribution and waste”, representing a “significant proportion of an organisation’s carbon footprint”.

Another Procurement Policy Note stipulated job creation, investment in skills and opportunities for local growth should be taken into account when awarding public contracts. Outlining the UK’s National Procurement Policy Statement, a set of strategic priorities, the note said organisations should ensure the wider benefits of spending public money were factored into procurement processes.

The Greens said Amazon should be stripped of procurement contracts with the Scottish Government following revelations of unsold new stock being destroyed. An ITV News investigation found millions of items at Amazon’s Dunfermline warehouse, including TVs and laptops, being sent to recycling centres or landfill, a level of waste the Greens called “obscene”. An ex-employee told ITV they had a target to destroy 130,000 items a week, with around half of them unopened and still in shrink wrap.

The CIPS Procurement Power List 2021 was launched showcasing the best leadership skills in the profession. The 25 on the list were chosen because they had “real credibility in the wider procurement community” and a “reputation for delivering”, said Malcolm Harrison, group CEO, CIPS.

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