It’s hard to have too much sympathy with one of the UK’s biggest discount retailers, but the recent experience of Primark and the controversy surrounding their somewhat dubious supply chain practices merely illustrates the potential pitfalls of global sourcing in such a highly competitive industry.

Panorama discovered that suppliers in Indian had sub-contracted work to home workers – a practice that had escaped the attention of those who audit the company’s factories in India.

However, it’s unlikely that Primark – who subsequently dumped the suppliers following the BBC investigation – is alone in falling victim to this kind of sub-contracting, which begs the question of whether the role of the supply chain auditors should be expanded.

As the procurement functions in the western world grow ever-more demanding then so the pressure on suppliers in the developing world grow. And tighter deadlines and order turnaround times in the current economic climate have inevitably placed suppliers, many of whom cannot afford to lose valuable business, in a difficult position.

Few would argue that auditors have a duty to look beyond the factories that supply some of the world’s most powerful companies, but how they gain access to the somewhat murkier world of sub-contracting remains to be seen.

And until they find a way, ethical sourcing concerns will abound.

What to do about the cost of oil is fast becoming the $64,000 question of our time.

World leaders were sweating in Saudi Arabia this weekend (not just because of the stifling heat but also because of the pressure they’re all feeling in their home countries as fuel prices continue their seemingly inexorable rise) and, at least, one thing is now clear – there’s a consensus that something needs to be done before global business suffers lasting damage.

There are still those at Opec who continue to blame speculators, and not supply issues, for the price hikes but recent events in Nigeria, and ongoing instability in the Middle-East appear, from this end at least, to suggest that both are culpable.

From a procurement perspective the noises coming from Jeddah are finally offering some crumbs of comfort that an area of spend that has risen beyond all predictions could soon return to more manageable levels.

Don’t get too excited though. The final communiqué from the conference made no mention of increasing supply, although Saudi Arabia did concede that more oil would be pumped from the region “if demand for such quantities materializes and our customers tell us they are needed.”

With that statement in mind, Opec officials can expect their mobiles to be ringing off the hook in the coming days.

After months of bringing you doom and gloom on the pressures facing procurement and the slowdown in the global economy there does (at last) appear to be some light on the horizon.

Earlier this week Procurement Leaders brought you the news that O2 was embarking on a dramatic expansion of its procurement team – in recognition of the roll it’s played, and will undoubtedly continue to play, as times get tougher.

And today we reported the findings of an American Express study involving financial chiefs at some of the world’s largest companies who appear to be, if not laughing, then at least sniggering openly, at the doom-mongers who persist in peddling stories of impending Armageddon.

Adrian Eadie at O2 described the company’s increased emphasis on procurement as a “huge boost”, and its forthcoming project should provide the industry with some much-needed impetus and inspiration it needs to make a difference at the current time.

The summer is here and after an eminently forgettable 2008 so far, things could, just could, be about to change.

Enjoy the sunshine (it might not last).

Tim Minahan of Ariba

Compared to North American firms, European procurement organisations have been reluctant to embrace online sourcing approaches. Their long-time reticence has stemmed from resistance to e-sourcing methods both internally and from suppliers, as well as from a general misunderstanding that e-sourcing = e-auctions. (It doesn’t.)

Yet, private conversations and public presentations at Ariba LIVE Brussels offered hope that e-sourcing (including online auctions) is fast becoming standard operating procedure on the Continent.

Over a dinner and bottle (or two) of fine French wine, a procurement executive from a European aerospace manufacturer, told me that he directs his team to use e-sourcing for every sourcing project. And he prefers that they run a reverse auction. “We are of the mindset that you can auction anything. We’ve auctioned everything from IT to legal services. I refuse to accept that something can’t be put out to bid.”

His gusto was matched by the head of sourcing for a European oil and gas company: “We now align [buyer’s] incentives with how much of their spending is sourced online. We view e-sourcing as the sourcing process, not a subset of it.”

Listening to Telefonica CPO Juan Carlos Montejano Dominguez deliver the Ariba LIVE Brussels keynote the following morning, it was easy to see why European procurement leaders have caught e-sourcing fever.

Over the past year, Telefonica ran more than 35,000 e-sourcing projects for nearly €17 billion in goods and services — a more than 1,500% volume increase since 2003, the first full year of the e-sourcing program. And the telecommunications giant is far from finished. Dominguez is pressing his team to hit a run rate of 70,000 e-sourcing projects per year — a third of which will involve e-auctions.

Why is Telefonica so bullish on e-sourcing? Simple: results. As the below chart clearly indicates, Telefonica has yielded far greater returns from its e-sourcing than offline sourcing projects. And returns from e-auctions are even better.

Dominguez reported that e-sourcing has yielded considerable benefits beyond negotiated savings. Since launching its e-sourcing program five years ago, Telefonica has:

• Cut sourcing cycle times in half.
• Reduced management cost per awarded amount by more than 27%
• Increased the amount of spend managed per FTE by more than 85%.

In addition to these benefits, Dominguez said e-sourcing has actually improved supplier relationships. “e-Sourcing has introduced a new level of integrity and transparency into the process,” said Dominguez. “It increases competition and objectivity in award decisions.”

To back up his assertion, Dominguez shared the results of a recent survey of Telefonica suppliers. Some key findings:

• 77.3% of suppliers felt e-sourcing “promotes competition and equality of opportunities”
• 80% said e-sourcing “increases transparency of the purchasing process”
• And, more than 70% of suppliers reported that “e-auctions are a transparent method of contraction and they guarantee equal opportunities.”

Feedback and results like these underlie why e-sourcing is finally being widely adopted across Europe.

Talent management rarely hits the headlines here in the UK, but the issue received a considerable airing in the British press this morning.

Luis Felipe Scolari’s appointment as Chelsea manager dominated the back pages, whilst Alan Sugar’s decision to say “you’re hired” to Lee McQueen – the dairyman’s son who lied on his CV and is now preparing to milk Amstrad for all their worth – grabbed the headlines in the nation’s tabloids.

After an exhaustive process – for both candidates and viewers in the case of The Apprentice – both club and company believe they’ve got the right man for the right price. And al though the rarefied atmosphere of the English Premier League and reality TV, are far removed from the rather more down-to-earth world of procurement, the recruitment principles involved in both appointments are remarkably similar to those that go on in boardrooms across the world on the daily basis.

Everyone wants the best person for the job, where experience, charisma and an ability to lead are crucial – and whether you’re earning £100,000 or £4m a year is, in reality, irrelevant.

In football, like procurement, there is a desperate dearth of managerial talent, sending the price for the best candidate sky-high. And, as in procurement, where talent gravitates to the companies with the best reputation (and the deepest wallets) then so the same thing occurs in the beautiful game.

Ironically, after seeing off his competitors McQueen declared: “I delivered. I’m Manchester United.”

If Chelsea’s new man fails to live up to expectations then he could be hearing the words that have made The Apprentice famous, before having had time to find his way from the local tube station to Stamford Bridge (for those who haven’t seen the show those words are “You’re Fired”, delivered with an evil glare and a characteristic point of the Sugar finger, although in Scolari’s case they’ll be uttered by one of the richest men in the world – Roman Abramovich).

Those procurement operations that don’t deliver can expect the same treatment.

As reported by Procurement Leaders earlier this week, an investigation by a leading English newspaper has once again exposed the pitfalls of sourcing from countries where child labour is viewed as routine.

And it’s ironic that many of us would have read the findings of The Observer’s  expose of child cotton pickers on Sunday in bed – under cotton sheets purchased from retailers on whom the spotlight will undoubtedly fall after this damning investigation.

According to the report, children as young as six were found to be spending up to 10 hours a day in Egypt’s cotton fields, earning as little as 20 pence an hour.

Despite a law banning those under the age of 14  from working – and a high profile campaign aimed at  eradicating child labour at the African Nation’s Cup held in Egypt in 2006 -  the problem persists and is likely to do so for as long as NGO’s claim that dealing with the problem is “impossible” (they claim that it is often simply an issue between families).

But while many companies who source cotton from Egypt claim (rather lamely) that their suppliers are required to meet certain standards solely within the factories that produce their products, they appear unprepared to look beyond those four walls and into the fields which, the Observer estimates, employ of one million young Egyptians.

“I think they (the companies) would be horrified,” said Juliette Williams, a spokeswomen for the Environmental Justice Foundation, before pointing out that Egyptian cotton is the only cotton sold with the country of origin as a selling point.

Unless action is taken, the label may soon develop altogether different connotations.

If oil wasn’t topping procurement’s agenda at the turn of the year, it certainly is now. Over on his spendmatters blog Jason Busch tells readers how Friday’s price surge – which even in these turbulent times caught most people on the hop – saw the cost of crude rise near to a potentially ruinous $140-a-barrel.

Hardly music to procurement’s ears given that a recent CIBC World Markets Report claimed that once oil hit $120 a barrel, “Every 10% increase in trip distances translates to a 4.5% increase in transportation costs.”

Busch uses the example of the cost of shipping a container from Shanghai to the eastern seaboard of the US having risen 250 per cent since 2000 (when oil prices were a relatively benign $20-a-barrel).

Clearly the latest price hikes are going to put more pressure on those organisations that lean heavily on global sourcing. Any further rises and they may start to ask, if they haven’t already, if the strategy is really delivering the results it once did.

It’s not just executives at the world’s major airlines who have been left shaking their heads in collective disbelief at the astronomical price rise of fuel in recent months – those charged with managing companies’ travel spend aren’t having things too easy either.

The soaring cost of fuel has sent flights prices through the stratosphere in recent months – even the seemingly recession-proof Ryanair has said that it may only break even in 2009 – meaning that procurement travel costs have gone the same way.

However, some companies, and countries too, are taking an innovative approach to cost cutting. Over on BusinessGreen.com, a report claims that Cisco has saved 16,000 journeys at a cost of $141million by replacing expensive business travel with teleconferencing.

"We are beginning to see some really interesting case studies which highlight the scale of the savings that can be realised," said Tim Stone, the company’s senior marketing manager for unified communications. "Internally we have had 214 TelePresence units deployed.”

It’s an impressive figure, which seems to suggest that on-screen communication and virtual handshakes could soon replace the real thing. And whereas nothing will ever replace the face-to-face interaction that is so crucial in forming lasting relationships with both suppliers and vendors, teleconferencing could soon represent the kind of cost savings that are hard to ignore.

The green revolution is in full swing, and nowhere is this more in evidence than in the IT industry, as a recent report from Forrester Research has amply illustrated.
According to the group’s study ‘More Green Progress in Enterprise IT’, environmental concerns are now “very important” to over 40 per cent of respondents, a figure that just 12 months ago would have unthinkable.
Of course, as with all studies of this nature, this only offers a snapshot of a company’s intent, but there are growing signs that firms are beginning to back up their thoughts with action.
For example the report, which involved over 700 firms companies found that four out of five now have fully-fledged IT equipment recycling programmes in places, many of whom use a third party recycling provider.

It’s not just the private sector that has caught the green bug, however, the study also suggests that the public sector is simultaneously embracing and belting out the green message.

So is this sea change motivated by a mix of plain old economics and a genuine desire to adopt a more responsible approach? Who knows, but an industry that often likes to think of itself as a market leader appears, once more, to be one step ahead of the opposition.