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.

In a move that will surely bring a smile to the face of Al Gore, the U.S. Army has announced that it’s launching a fresh push in the Middle East, although to the relief of most, the latest move isn’t aiming to capture any land – this time it’s designed to lower the force’s carbon “bootprint”.

Tad Davis, deputy assistant secretary for environment, safety and occupational health in the U.S., said that the eventual goal is to lower Army emissions by 30% by 2015.

"What I'm interested in doing is finding out what the greenhouse gas emissions, this carbon bootprint, are for the Army in two to three years at the latest," Davis told Reuters. "We want to emit less and do that, hand in hand with reducing energy consumption from fossil fuels."

Of course, lowering emissions does have huge advantages for a force that is currently stretched to almost unprecedented levels.

The Army’s long supply chain during the first five years of the Iraq conflict put the US Army’s many convoys – most carrying large quantities of fuel – in extreme peril. Davis now argues that cutting the amount of fuel required on the front line, a massive challenge for forces relying heavily on fleets of armoured vehicles, can cut both emissions and, more crucially, casualties.

"There's emerging technology that is providing lighter-weight armour, so I think at some point ... you're going to see more hybrid vehicles in the tactical military fleet," he said.

That day could yet be a long way off (like the US army’s withdrawal from both Iraq and Afghanistan), but Davis appears intent on ensuring that this latest initiative is more than just hot air.

Could this week’s downturn in oil prices be a portent of things to come? Over on Spendmatters, Jason Busch certainly thinks so – and believes that oil may soon fall below the $125-a-barrel threshold needed to make “global sourcing decisions that much more palatable and profitable.”

This week’s fall in the price of oil has given every procurement organisation  some much-needed breathing space and, with oil dropping beneath that magic $125 figure during Friday trading (who would have thought we would be celebrating that this time last year), many CPO’s will have enjoyed this weekend just that little bit more.

“For all those who were talking about $200 per barrel oil, bite your tongue,” Busch says.

In this still uncertain climate, no-one is likely to be willing to predict how long they’ll stay silent for.

It’s no longer just cool to be ethical, it has become a necessity.

Or so says Dr Jem Bendell, who noted that once favourite brand of the stars - Dolce & Gabanna - was hardly a presence at this year’s Oscars.

Dr Bendell suggested that D&G had fallen from grace with the A-list because of alleged unethical supply chain issues. For example, last December, an Italian TV documentary 'Slaves of Luxury' had detailed cases of illegal Chinese immigrant labour in Italy allegedly making accessories for a number of brands, including D&G.

But perhaps the best example of the popularity of ethical fashion is the return of designer Katherine Hamnett to the fashion scene. Hamnett left the scene four years ago after she found it hard to push sustainable fashion. But today, as shoppers become more aware of ethical fashion, designers such as Hamnett are having the last laugh.

So supply chain directors, take note – as consumers grow more ethical, so must you.

Today Procurement Leaders reported that some of the UK’s largest companies were set to sting their suppliers by announcing extended payment terms.

The plans - another unwelcome by-product of the credit crunch - are another indication that cash is fast becoming king and appears to represent a hammer blow to suppliers that are already feeling the pinch.

The little guy, however, doesn’t appear to be taking the news lying down, as Alliance Boots has found to its cost.

Last year, the chemist chain wrote to suppliers telling them that invoices would be paid up to 75 days from the end of the invoice month – a dramatic increase on the previous, somewhat more reasonable, timescale of 30 days.

The company also announced plans to charge a 2.5 per cent “settlement fee” – effectively a charge for paying the bill, whilst claiming that its procurement strategies were “in line with other groups of similar size and scale.”

The Federation of Small Businesses (FSB) claimed that the company’s new policy, in reality, extended payment terms to 105 days, and have prompted one supplier to take action.

"Making small businesses wait 105 days for payment and charging them for the privilege of doing so is nothing short of outrageous," the FSB said, and training business MTa International appears to agree.

The company, which unlike the corporate giant it’s taking on has just two employees, has threatened to withdraw its services unless Alliance Boots re-thinks its policy, which last week it did.

But whilst MTa celebrate other suppliers are still facing up to a stark, and rather unpleasant reality - the big boys, meanwhile, appear intent on sticking the boot in.    

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.

For those companies relying on China for their sourcing needs it’s crunch time. This week factories around Beijing are downing tools to help the Chinese capital hit its pollution targets as the countdown to the 2008 Olympics enters its final stage.
 
From July 20 the Chinese government will enforce construction sites, mines and chemical plants around Beijing to stop churning out CO2 until the self-styled greatest show on earth finally leaves town in mid-September.
 
Polluting factories around the capital will be put under pressure to cut emissions by as much as 30%, while more than 300 factories in the cities of Tianjin and Tangshan will also cease production for the next eight weeks.
 
The news may be welcome for the long-suffering residents of a city where pollution is a daily hazard but for already stretched supply chains the shut-down is about as desirable as a visit from the taxman.
 
China has invested $17bn is an attempt to clean up its environmental act before the world’s media descends on the country – although whether this short-term solution is any solution at all is a moot point. Fighting pollution is, after all, a marathon and not a sprint.

Interesting article in The Economist today focusing on what the newspaper calls "the high priest of 'peak oil'". If you haven't heard of the high priest, Matthew Simmons is an investment banker that put his head above the parapet and declared that oil production had peaked way back in 2003 when you could still get change from a quid for a litre of petrol.

Simmons' credibility comes from the fact that he's an oil man himself - he founded an investment bank which has so far handled more than 500 M&A deals in the sector. And he spent a huge amount of time researching his book Twilight in the Desert: the coming Saudi oil shock and the world economy which took a rather more cynical view of then-popular theories about Saudi production capabilities.

So, what's keeping Simmons busy now? Farming, apparently. He aims to establish a farm in case the supply chains that provide the US with its food break down due to a lack of oil. He also says that globalisation must stop and that as much trade as possible should be conducted by sea.

Nothing new there, you might think. But when the oil men start growing their own vegetables you know that something must be wrong...

The UK's Farnborough airshow has traditionally offered a platform for some of the aviation industry’s biggest hitters to flaunt their wares and generally show-off for a week in front of the world’s media. This year, however, there promises to be a slightly more downbeat feel to an event that has acted as a magnet for the great and the good since it was first held in 1948.
 
And from a procurement standpoint the biannual show promises to make for fascinating viewing over the next seven days. No industry has been hit harder by the "perfect storm" of global economic conditions, and the 140,000 or so aerospace and defence professionals descending on the South of England this week will have one word on the tip of their tongue.
 
The soaring cost of fuel is hitting every business hard, but airlines are feeling the pinch more than most, and on a day when Airbus said that rising fuel prices were actually boosting its order books – “we have the most energy efficient aeroplane in the world – the aeroplane of the future,” according to EDS CEO Louis Gallois – those involved in aviation procurement will undoubtedly be on the lookout for potential avenues for further cost savings from green innovations.
 
The potential of securing package deals that include both the servicing and repairing of aircraft is another area which companies will increasingly be looking towards procurement to secure, and is likely to be another key emerging trend as firms look to gain greater control of their spend.
 
One thing that does seem certain is that the news coverage this week is far more likely to centre on procurement issues rather than headline-grabbing orders – the perfect storm has already taken care of that.
 

Perhaps this is what it's like to be a real CPO - arriving in a strange foreign city with only a Blackberry and laptop for company...

The City is a drisly Luxembourg, where we have endured a nerve-shattering flight on a Fokker 50 out of London City Airport to come and look around Vodafone's new central procurement hub. Our host for the day is its chief executive, and Vodafone's global supply chain management director, Detlef Shultz.

So far, so good. If it wasn't for the so-called "mild" turbulence during the flight and the gentleman in front who almost broke my legs when slamming back his seat, the flight would have been bearable. Still, small price to pay for Vodafone procurement executives who recognise the efficiencies and benefits of housing its entire procurement operation under one geographically central roof.

I look forward to hearing more about it and filling you all in on what it takes to establish a procurement hub for a company the size of Vodafone.