Is consolidation the best way for companies to survive the global economic slowdown? For the aviation industry the answer, most definitely, appears to be a resounding yes.

Just this week the UK’s flagship airline, British Airways, announced that it was in talks over a proposed merger with Spanish carrier Iberia.

Using Air France’s 2004 tie-in with Dutch airline KLM as its model, BA, and its Spanish counterpart, will doubtless be hoping that the “together we’re stronger” approach will bring rewards.

After chatting to a leading aviation analyst earlier this week, however, Procurement Leaders has some words of warning.

According to Peter Morris, analyst at aviation consultancy Ascend, consolidation is no panacea to the immense problems facing some of the world’s largest carriers.

“It depends if you’re joining up dinosaurs or race horses,” he said. “Join two dinosaurs together and all you end up with is a larger lumbering organisation. Get two race horses and you could easily produce a thoroughbred.”

So there you go – BA be warned, hurdles undoubtedly await.

It’s not often you’ll find the ‘s’ word on these pages, but a recent blog over on Modern Materials Handling caught my eye after successfully pulling off the unlikely feat of including ‘sex’ and ‘green supply chain’ in the same sentence.

Using a line from John Clark, the marketing manager for Dematic, Bob Trebilcock told readers that “the green supply chain is a lot like high school sex……….everyone is talking about it, but not a lot of companies are doing it.”

Materials Handling claims that they’re still seeing precious little evidence of green initiatives graduating from the boardroom to the metaphorical shop floor, and Clark’s conclusion (once the schoolboy guffawing at the back has finished) will strike a chord with many CPO’s who are being asked to implement sustainable procurement practices without the required resources, guidance and financial support. Problems that often leave them fumbling in the dark.

It’s unclear as to how procurement jobs will be directly affected by the global credit crunch but whilst JP Morgan has predicted as many as 40,000 jobs could be shed in London alone, those willing to up sticks and seek their riches elsewhere could be handsomely rewarded.

It’s safe to say that the jobs market in the US and Europe has enjoyed better times (although jobless figures on this side of the Atlantic still give little indication of the slowdown biting), but as long as Asia and other emerging economies, in particular the Middle-East and Russia, continue to expand at their current rate, jobs will, it seems, be there for those willing to look outside their own borders.

Procurement expertise is highly sought after across the globe – and one country’s loss could certainly be another one’s gain.

Last week we reported the findings of a survey from the British Chambers of Commerce which showed that price pressures in the UK were running at their highest level for a decade.

Now, official figures have illustrated just how tough things are getting for procurement at a time when the need to achieve demonstrable cost savings is more pressing than ever.

According to the Office for National Statistics (ONS) manufacturers’ costs rose by a record 20.4 per cent in March, while factory gate prices also got in on the act – finishing the month at a 17-year high.

The reasons for this spike are well-documented and fall largely at the door of spiralling fuel costs, which last week hit a fresh high (yes another) of $112.21 a barrel.

The news will be hardly be welcomed to those in procurement (although the confirmation of what is blindingly obvious will hardly come as a surprise), but it’s unlikely that the governor of the Bank of England will be raising a glass to the figures either.

After all, the Bank’s Monetary Policy Committee bowed to public (and private) pressure last week to cut interest rates in the UK by a further quarter of one per cent, as businesses, and a government that appears to going the same way as the Titanic, looked desperately for an immediate solution to what is, quite clearly, a long-term problem.

"Ongoing elevated producer price inflation in March highlights the fact that the Bank of England cannot afford to relax on the inflation front and suggests that the Bank continues to have limited scope to cut interest rates — for now, at least,” Howard Archer, chief UK & European economist at Global Insight, said after last week’s decision.

Tougher ones lie ahead.

Extreme fluctuations in the value of both the dollar and the euro have hit Franco-German aerospace group EADS harder than most in the past 12 months, so it’s no surprise to hear – after a week in which the company’s CEO Louis Gallois announced results well below analysts’ expectation – that the company is finally preparing to take action to reduce their currency risk.

On Tuesday Gallois told London’s Financial Times that the breaching of the $1.50 mark by the euro could signal a prolonged period of exchange rate pain.

Which goes some way to explaining a statement from the company concerning plans to pay suppliers in US currency in the future.

“The ability to pay in dollars is something we will look on favourably in future when negotiating contracts with suppliers,” a spokesman told the BBC.

Whether the news is greeted with a similar enthusiasm remains to be seen but given the cost to their business of currency fluctuations over the past 12 months, EDS have to grab every advantage they can take.

The endless series of gloomy predictions and poor figures from big players across the pond has already served to lengthen the faces of already strained procurement execs and the latest global PMI figures certainly haven’t served to lighten the mood.

Global factory growth slowed to its lowest level in four-and-a-half years here in the UK, as the JPMorgan Global Purchasing Managers’ Index fell to 51.1 last month (down from 52.3 in January), a downturn reflected in the rest of Europe, with Spain and Italy coming off worst.

In the States, figures from the US Institute for Supply Management showed that PMI had fallen to 48.3 in January – below the magic 50 figure that acts as the increasing thin dividing line between growth and contraction.

The figures caused Ian Shepherdson to claim that the ISM manufacturing index is now in the “no-mans land” between weak growth and recession.

Even factory activity in India and China slowed and despite euro zone inflation holding firm at its current level of 3.2 per cent, price pressures at the factory gate mean that the European Central Bank are likely to give any potential interest rate cuts a short shrift at their monthly meeting on Thursday.

Procurement and the U.N. have often made for uncomfortable bedfellows, but when the organisation trumpeted its reform of a system that had come under increasing scrutiny in recent years, it finally seemed that the days of scandal were at an end….or so we thought.

Now, an investigation by FOX News has revealed that a firm that was suspended from the United Nations Procurement Service list of authorised vendors in March 2007, still received over $2.1m from the United Nations Development Programme (UNDP).

The reason? Well, according to UNDP officials, as they are a legally separate U.N. agency they are not bound to honour the Procurement Service sanction.

The irony – not lost on those unforgiving souls at FOX – is that the UNDP is the premier agency through which the U.N. operates in most of the 160 countries it currently services, and is a leading figure in the program known (rather unfortunately given the current circumstances) as “One U.N” – a scheme designed to rationalise the delivery and efficiency of U.N. services across the globe.

Italian firm, Corimec S.p.A., the company who sold the U.N. more than $30m worth of goods in 2006, were dropped by the organisation after being involved in a high profile corruption scandal.

However, documents obtained by FOX suggest that the ink was barely dry on the order to remove it from its list of vendors than the UNDP was considering using the company to fulfil an order from agency’s Pakistan office.

The news is likely to come as a devastating blow to the U.N., but clearly illustrates the procurement challenges facing such a vast organisations. This leopard, it seems, will need more time to convince a sceptical public that it has changed its spots.

It’s not only UK supermarkets who have been in the dock following allegations of price fixing recently - it appears that Danish Christmas tree growers are getting in on the act too.

According to reports, the Danish Christmas Tree Growers’ Association has been accused of attempting to rig prices, despite being warned by the country’s competition commission about the practice twice in the past six years.

Anyone who currently has a Nordmann fir perched precariously in their front room is likely to have paid 25 percent more for it in 2007 than in 2006, as Denmark ’s 4000 or so Christmas tree farmers cash in on soaring demand and limited supply.

The Tree Growers’ Association blame the booming Christmas tree market in Eastern Europe for the price jump, but those claims have received a prickly response by officials in Scandinavia.

Of course, in an industry worth over $250 million a year, the tree farmers are likely to dispute the commission’s charges fiercely, which should make for an interesting exchange of views (and not presents) this Christmas.

Google, Microsoft, Oracle – all big names, all big players. But how did they get to where they are? And is their path still the one to follow if you seek business success? Some might say yes – the current global credit crunch could be seen as merely a blip on the overall landscape – and companies that wish to grow and expand can still look to aggressive M&A activities (as these companies have done) as the sure-fire way to achieve a higher level of growth. Others might be less confident.

The business world is now a different place due to the global credit crunch. Money is too hard to come by, and the risk levels associated with acquisitions are now based on a much higher threshold. Traditional M&A activity is simply less likely to happen unless there is a no-brainer business case.

Those acquisitions that do happen will have to be more collaborative with comprehensive mechanisms to mitigate risk. Mergers may become less defensive and more focussed on achieving economies of scale and improving market share.

All of this will mean an increased focus on organic business growth. For the CEO who has spent the bulk of their business life utilising M&As as mechanism of expansion this could come as a shock, and they will now have to start focusing on how to encourage organic growth, including wiser implementation of procurement strategy, to reach their business goals.

For procurement professionals these new business trends will, in all likelihood, mean having to show greater flexibility in the contracts that are put together with suppliers and an improved understanding of the financial health of the companies with which you choose to do business.

Ever wondered how current economic instability and the rapid growth of emerging markets was effecting M&A activity in Europe? Well wonder no more, because mergermarket’s Heat Chart provides an accurate barometer of what movement (or not) we can expect to see over the next few months.

The H1 2007 mergermarket Heat Chart, uses press reports, company statements and the company’s own proprietary intelligence, to produce a strategic indicator of future M&A activity. And this year’s findings offer a fascinating insight into the effect that current business trends are having on a fragmented market.

According to the latest figures, the UK continues to lead it’s European neighbours in M&A activity, a fact attributed to its “high levels of transparency and certainty, low barriers to entry and a long-established culture of deal-making.”

Elsewhere, the emergence of India as an economic powerhouse, and the increasing popularity of both Central and Eastern Europe as a location for offshoring is driving strong M&A growth as companies look to consolidation as a means of securing their competitiveness.

The growth seen in areas such as Russia and Central and Eastern Europe is also creating a strong demand for inbound M&A, although the figures indicate that the relatively complexity of completing deals in these areas dictates that only a small number of deals have found their way into an ‘Announced Deal Heat Chart’ dominated by the UK, Germany, Austria and Switzerland.

However, whilst mergermarket’s research suggests that when it comes to M&A, Europe’s more mature markets still have significantly higher conversion rates, increasing levels of interest and investment from a diverse range of international players suggest that it won’t be long before Russia, Central, Eastern and Southern Europe begin to close the gap.