Building Back Supply Chain Resilience

Posted 13 July 2021 | | 0 Comments

Procurement teams have never been more stretched for time, as the number of supply chain challenges mount. Let’s consider the last 18 months, and it’s not pretty - the financial stress and supply chain disruption (think computer chips and PPE) caused by the Covid-19 pandemic; the surge in cyber security attacks which have increased operational and reputational risks; the supply disruption and reputational risks caused by the climate crisis; tariff barriers and admin delays caused by geopolitical tensions such as Brexit and US/Chinese trade disputes; and as if that wasn’t enough, we’ve had localised incidents with a global knock-on effect, such as the supply disruption caused by the Suez Canal blockage which held back estimated $9.6bn worth of goods per day.

These shocks have shed light on the fragility of global supply chains. Business leaders and politicians have been quick to question our decades-long obsession with outsourcing overseas (particularly to lower cost Asian economies). One cited example is the global shortage of computer chips caused by the covid-19 pandemic – staff shortages in the Asian manufacturing plants cut supply at the very moment when more chips were demanded as huge numbers of people started working from home. The huge smartphone and consumer electronics buyers outgunned smaller buyers of vehicle manufacturing based chips, forcing car production of higher end models to be delayed.

So how do UK companies evaluate the degree of supply chain risk? And what strategies should be followed to ensure that both risks and opportunities in this new world are managed effectively?

First, Gather Intelligence

To review supply chain risk and opportunity effectively, procurement requires intelligent data and transparency from their suppliers and the markets in which they operate. Any evaluation without good quality data is less meaningful and potentially dangerous if key business decisions are going to be made post evaluation. Suppliers may be reluctant to be open to their clients, particularly if they are in a vulnerable financial position or nervous about losing demand.

This is where procurement needs to communicate effectively with its existing and potential suppliers, to build trust through openness. And to look for other independent sources of intelligence where possible to validate the accuracy of information being fed from the suppliers. Financial credit checking, cross referencing with clients in non-competing sectors and market research are all options to consider. Equally businesses must invest in planning tools able to rapidly detect shifting trends in customer demand and in supplier capabilities and risk factors.

Next, Risk & Opportunity Evaluation

Armed with timely supply market intelligence, Procurement must then evaluate both the probability of various supply risks and their likely consequences. ‘What if’ scenario planning is a good way of approaching this as it helps identify possible risks. Procurement cannot do everything at once so will need to work with other parts of the business to decide on which risks need addressing, in what order of priority and with what level of resource and funding.

As well as risk factors, procurement must consider supply performance. Are suppliers delivering best value, including evidencing how they are mitigating risks? If buyers have negotiated hard in the past and cut out most of the supplier profit, it may increase the risk of the supplier being unable or unwilling to take decisive action. It is also vital that service levels are being monitored carefully, to help spot any negative performance trends early on.

The third element to consider is current and future capability of the suppliers to expand products and supply capacity as markets start to bounce back. Have the suppliers been damaged to the extent that they are unable to react swiftly to changes in the market?

Then Develop Supply Chain Strategies

Once risk, performance and capability have been evaluated across the supply chains, procurement must work with other stakeholders across the business and customer base to develop sourcing strategies which align with future customer demand, internal resources and budgets.

One short term tactic might be to stock build, though this is proving more challenging with UK warehousing space at a premium and with rents climbing rapidly; this also requires that a company has sufficient cashflow funds. Smaller companies may not have the cash to make this strategy viable.

A multiple sourcing strategy, ideally across more than one region, is one approach to ensure protection against supply chain disruption. Whilst it can take time to develop, building a portfolio of suppliers can help to ensure continuous supply availability. But this only works where there are several supply options and where the products being sourced are standardised.

Many supply chains remain rigid and vulnerable to supply side shocks. To counter this, another strategy could be to push for product or service innovation or product rationalisation to enable the interchangeability of inputs, standardisation of components and switch of production sites. Standardisation also helps with economies of scale and so lower cost. Diversification of product or service or moving into new markets and new customers can help the business bypass existing supply chain challenges or take advantage of lower cost/risk supply chains.

Building strategic partnerships with critical suppliers is the most effective strategy in a world of disruption and may be critical to the future success of a business if they are unable to extract themselves from existing supply chains. It ensures business as usual whilst giving the business more influence to reduce risk, cut costs and improve sustainability. It can also help suppliers suffering from financial stress as the business can potentially subsidise them with funds (or just paying them faster) or work on shared projects to cut costs – all are more likely when there is a longer-term commitment and trust built between buyer and seller.

By integrating supply chains, the business can obtain accurate and real-time data which helps it make informed decisions at the right time. It can also share challenges and data back the other way, such as forecast demand and client behaviour trends, and pool resources and funds to streamline supply and remove costs. It has the added advantage of giving the business greater ability to manage cross supply chain challenges such as sustainability, CSR and cyber threats.

The business must also consider the logistics providers as well as the manufacturers. Increasingly there will need to be closer collaboration between companies and their logistics providers across the supply chain to ensure that lead times remain competitive and supply disruption minimised.

Future Proofing the Supply Chain

The business must continue to monitor supply risk and opportunity and to develop supply options as customer needs and markets continue to change – in other words they must future proof their suppliers. Covid has forced change to happen much more rapidly than would have previously been predicted and the state of flux will remain for many years to come. One example is the shift to home working and flexible working patterns. Businesses will need to monitor their suppliers’ ability to support their remote workers and digital communication and those suppliers providing adequate upskilling and support structures for their employees will be favoured by buyers.

A balance needs to be struck between building flexibility through diversification of supply on the one hand and creating strategic supply partnerships on the other. It requires careful evaluation of risks and a development of a supplier strategy over short/medium/long term. But by being proactive now, companies can use the current disruption as a trigger to shake out old rigid supply chains and to build back stronger with built in agility, future proofed and with sustainability at its heart.

by Matt Roper | 13 July 2021

Partnership with West Midlands ScaleUp

Posted 25 March 2021 | | 0 Comments

We're delighted to have partnered with a group of high-profile professional services organizations dedicated to the success of mid-market businesses, their CEOs and leadership teams based in the West Midlands. We are a partnership of well-established, ethical and successful firms committed to sound business advice, good service and long-term relationships. We have come together to create a business portal in order to contribute and celebrate the success of West Midlands and its business community. We hope you will join us on this journey!

To visit the West Midlands ScaleUp web portal, Click Here

by Matt Roper | 25 March 2021

ISO 20400 Sustainable Procurement – guidance for cutting carbon

Posted 25 March 2021 | | 0 Comments

For those organisations seeking to secure business through the UK central or local government, one thing cannot be avoided; public procurement managers are increasingly requesting evidence from bidders that their organisations have set CSR and sustainability goals and that they are working proactively towards achieving these goals. Hence the 10% minimum bid score weighting relating to sustainability and social value.

I have a strong belief that procurement has a critical part to play in greening up the organisation. This is because any company will struggle to reach its sustainability targets in isolation. Most carbon emissions are generated not by the organisation itself but rather by its suppliers – perhaps as much as 80%. Ignoring the supply chains in which an organisation operates means that they are only directly influencing 20% of the problem. So procurement must take the lead and develop policies and procedures to tackle the 80% which they have a varying degree of control over.

How should procurement start the process of developing an approach? Without a structured approach there is a high chance of inefficient use of resources and sub-optimal results. That’s where ISO 20400 is extremely helpful as it provides a consistent approach and means Procurement Leaders aren’t required to reinvent the wheel.

What is ISO 20400 Sustainable Procurement?

This April is the fourth anniversary of the publication of ISO 20400 Sustainable Procurement. This international standard builds upon the British Standard BS 8903 and provides an understanding of what sustainable procurement is, what the sustainability impacts and considerations are across different aspects of procurement activity and how to implement sustainable procurement. This standard is for guidance only, so cannot be officially audited and certified.

If you company has a CSR goal to become more sustainable, ISO 20400 is an extremely valuable framework by which your purchasing people can align their activities with your overarching company-wide sustainable objectives. Without a structure in place plus base line audit and regular milestones for performance improvement, it is very difficult to ensure that your company is moving in the right direction.

So what does ISO 20400 cover? It is not possible to do this justice in a short blog post so I’ll focus instead on how it builds on previous Sustainable Procurement standards (e.g. BS8903). There is a greater emphasis on social responsibility and on the identification and prioritisation of sustainability issues. It makes sense to prioritise given scarcity of resources and time – both at a company level, a cost category and supplier level. If you can achieve some victories early on where the resulting reduction of carbon or waste is significant, this will help maintain the motivation to continue.

In terms of risk and opportunity, ISO 20400 recommends a robust due diligence process to prevent, treat, reduce or control potential positive and negative sustainability impacts. It also recommends that procurement seeks to influence the behaviour of the suppliers and to avoid being involved in any wrongful acts. An organisation can be considered complicit where it stays silent about, or benefits from irresponsible practices of its suppliers.

The standard makes it clear that company leaders must work hard to drive commitment and responsibility across all levels of the organisation including the procurement function. It argues that the organisation will not achieve its sustainability goals unless individuals and teams are accountable.

The standard emphasises the need to measure and monitor the results of sustainable procurement. Four indicators can be used to manage performance:

1. Process indicators – how many contracts are compliant with sustainability; how many staff have been trained; how many suppliers have been engaged.

2. Output indicators – suppliers’ performance, carbon emissions, waste volumes, number of local employees.

3. Outcome indicators – help to understand the impact and contribution of the supply chain to overall company objectives, e.g. carbon footprint, workforce diversity.

4. Impact indicators – economic, environmental and social impacts that are positive/negative, direct/indirect, short/long term, intended/unintended.

The standard recognises the need for procurement decisions to take account of the wider cost data rather than simply initial purchase price. It recommends where possible extensive analysis to include impacts on society that can be monetised such as carbon emissions, job creation or losses and other impacts which can’t be easily monetised. Total Cost of Ownership (TCO) excludes external cost benefit analysis and so is an incomplete picture.

ISO20400 also challenges the organisation to consider its ability to influence its suppliers in relation to the sustainability agenda. It suggests that companies build a matrix with two parameters – Supply Chain Influence (ranging from ‘not significant’ through to ‘significant’) and Ambition (ranging from ‘low’ through to ‘high’). Where influence in a supply chain is high, the buying organisation should be leveraging this influence to encourage its suppliers to improve their sustainability practices.

Another important aspect of ISO 20400 is the strengthening of message around the verification of sustainability requirements. Procurement and those specifying requirements need to understand and decide on which certifications, marks or labels could or should be used to ensure compliance with sustainability. And whether such certification should be a requirement of anyone bidding for business. This needs careful consideration as not every supplier, particularly the smaller suppliers, will be familiar with such certifications and may lack the internal resource or cash reserves to put that issue right. In which case, rather than penalising them through dismissing their bid offer, it may be better for procurement to share best practice and offer to work with the supplier to help them to gain certification over time.

Procurement should provide clarity on what suppliers need to do to comply with sustainability requirements. If additional costs are involved, procurement need to consider who bears this extra cost and how necessary it is to spend such money. There is ultimately a balance between 100% compliancy at a very high cost, versus 75% compliancy at a much lower cost. But whatever certification is insisted upon or recommended within an Invitation to Tender, procurement should be explaining why such certification is sought.

My final point in relation to ISO 20400 is that it stresses the need for continuous improvement relating to sustainable procurement contracts via the “Plan, Do, Check, Act” approach. A debrief document is recommended which feeds into the next procurement and sourcing strategy. Publicising any lessons learned will also help other organisations learn lessons too.

by Matt Roper | 25 March 2021

UK Business Energy Market Outlook 2021

Posted 11 February 2021 | | 0 Comments

It is widely accepted that the COVID-19 global pandemic has fundamentally changed how the business world operates. Most businesses have been forced to adapt and for many, their workplaces were empty for much of 2020 as their staff worked from home. Consequently, business managers were less focused on their company’s gas and electricity needs. However, as we start to see the green shoots of positive change, it is now time for businesses to reconsider their energy procurement needs.

Business confidence builds, energy markets rally

Thanks to the rapid roll out of COVID-19 vaccines across the UK and the government starts to plan for the relaxation of lockdown, business leaders are considering how to adapt to the impact of changing business practices over the last twelve months.

Energy markets have rallied over recent weeks, reflecting increasing global fuel demand. Economists are predicting a rapid pick up in economic activity around the world as we move further into 2021 and this is likely to lead to energy prices continuing their climb.

In early December, the news of successful COVID-19 vaccine trials triggered a boost in confidence in oil markets which led to a surge in fuel and energy prices. Between start December to mid-January, Brent Crude Futures – a key driver for UK wholesale energy prices - have seen oil prices climbing by over 15%. On the back of these increases and recent colder weather, gas and electricity prices have soared by 24.72% and 17.06% respectively. To keep these increases in context; prices are still between 30% (electricity) and 13% (gas) cheaper than prices were in Autumn 2018.

As you consider your own business’s re-opening plan, it’s important to re-evaluate your energy procurement.

Does your pre-lockdown business energy contract still apply to your new way of working?

As part of your recovery plan, this is a good time to consider switching energy suppliers as your business needs shift into a new gear.

Given the key focus for businesses returning to the office being the safety of staff, it’s understandable that optimising utility contracts is perceived as being less critical. However, given the current strain on company cashflow, it is worth noting that there are savings to be had by doing your research now.

BSA Buying Group’s energy procurement experts can help cut energy costs

This is where BSA Buying Group can help. Over the last 15 years we’ve helped UK businesses of all sizes and sectors minimise their energy costs (and 25 other cost categories) and we’re confident that we can secure the best business gas and electricity prices for your business.

Our energy procurement specialists remove the hassle, are completely independent of the energy markets and are ready to find a tailored package that suits your long-term energy requirements.

Free energy cost forecasting dashboard

For a limited time only, BSA Buying Group offers its energy clients with one year’s free access to a utility management dashboard, presenting a regularly updated forecast of your energy costs for the next three years. It provides alerts at specific points in the financial year in line with your company budgets so you can take advantage of cost savings and reduce the risk of future energy price rises.

We know how important it is to free up cash in these challenging times, and BSA Buying Group can optimise your energy costs. Contact us today for a no-obligation discussion on 0800 254 0344.

by Matt Roper | 11 February 2021

Reclaim your Corporation Tax via GDPR Tax Credits

Posted 8 February 2021 | | 0 Comments

Cybersecurity has become a top priority for businesses adapting to remote working. What is becoming clear is that the threats to companies from data breaches caused by hacking has become a major headache for company bosses. A recent BT Security survey of over 7,000 business leaders, employees and consumers from around the world found some startling findings - 84% of business leaders admitted that their organisation had experienced data loss or another security incident in the past two years; less than half of respondents had received training on data security and only one in three were fully aware of their organisations' policies and procedures for protecting data.

Research has shown that at least 90% of UK companies are GDPR non-compliant even though many think they are. For example, Is your company registered with the Information Commissioner’s Office (ICO)? Millions of UK companies are not.

Now that the PPI Claims bonanza has ended, many of the claim companies and law firms involved in claiming PPI for clients are retraining as they see the next big opportunity is to claim GDPR compensation from companies. If you google ‘GDPR compensation No Win no Fee’ you will find more and more claim firms are popping up, looking for claimants. The media are increasingly reporting GDPR data breaches and the eye watering fines – you may recall British Airways were recently fined £20m for data breaches.

Ideally every company should be preparing a GDPR Compensation claims pot in case of being sued but the reality is that the vast majority don’t and so that protection fund instead ends up expanding the declared gross profits, resulting in more Corporation tax being paid.

We at BSA Buying Group are working with a team led by the former head of data privacy at 3 major banks, who have also advised clients such as Dell, Volvo and Hilton Hotels. They specialise in GDPR Tax Credits and have developed algorithms to calculate the level and value of GDPR claims risk specific to an individual company. Typically, once they understand what a client does to acquire, hold and use data they can put a £ value on that risk; as a result of this they can reclaim up to 2 years Corporation Tax from HMRC for our clients. As of the start of 2021 they had put through over 30 cases and HMRC have approved the full claim in every single case.

The reason why we’ve teamed up with these GDPR specialists is not just because they can generate significant cash for clients within 4-6 weeks. They equally see the importance of companies getting to grips with the GDPR non-compliance once the risk has been quantified. Our partners have developed GDPR expert software which guides the client to reduce future risks of being sued.

There are no upfront fees for the GDPR Corporation Tax reclaim service so if you would value an informal chat with our GDPR specialists about your own position and would value both a cash injection and future guidance to mitigate your risk of being sued for GDPR non-compliance, call 0800 254 0344 today.

by Matt Roper | 8 February 2021