Saturday, 28 September 2013

HS2 recruits butcher, baker & candlestick maker for business justification

I trust you were all riveted by The Times letters today which included a letter from freight company leaders. This appears just the latest attempt at creating the ever increasing HS2 business justification - recently it had become about capacity and regeneration too. I hope I am not breaching any copyright laws by quoting from the letter:
Building HS2 will free up much needed capacity on the West Coast Mainline which is a vital freight artery. That is good news, not just for us as freight companies, but for consumers. It could remove up to 500,000 lorries a year from our motorways. With fuel and road costs predicted to increase the costs of running lorries by 36% by 2040, additional rail capacity will ensure that food and drink continues to reach our supermarket shelves, at affordable prices. It will also, crucially, allow our exports, such as automotive components, to continue to reach European markets.
I have taken the liberty of emphasising some of the clues of how desperately weak this business seems to be - grand statements which lack certainty and also fail to consider that there may be alternatives. HS2 may not free up the West Coast Mainline. HS2 may not remove 500,000 lorries from our motorways and perhaps the lorries could be removed in a different way. The prediction of a 36% increase in the cost of running lorries by 2040 assumes an absence of innovation and any change in fuel taxes. The statement of affordable prices is a nonsense if you parallel that with the reality that currently many just can't afford weekly food bills at the present time. Then to cap it all we think that the market wouldn't be able to deal  with getting automotive parts to Europe.

In a nutshell, this latest intervention highlights the lack clarity on what problem HS2 is trying to solve and that we don't seem to understand why the HS2 investment is being made.

Could this whole HS2 debacle, linked with the rail franchise fiasco, be a Michael Gove orchestrated conspiracy to add business studies to the core curriculum?  

Tuesday, 24 September 2013

Reflections on eWorld Purchasing & Supply

Today I attended the eWorld Purchasing & Supply event. You wouldn't be surprised if I said a free conference was good value - well, to me there's no such thing as a free conference as there is always the opportunity cost of how you could have otherwise have spent your time. There's also the reality, that now, in many organisations, even justifying the costs of attending an event in London is a battle some feel just isn't worth fighting. But to me this was well worth attending and actually staying the whole day. (As an aside, it never ceases to amaze me that so few delegates have the good manners and ethics to stay the whole day!)

Having said all that, I found almost all of the sessions I attended of excellent quality and a really good opportunity to learn. So in a nutshell some interesting learning:
  1. Eva Wimmers from Deutshe Telecom, in an excellent keynote, reflected on the reality that a short-term focus on paying less is probably detrimental to the procurement 'brand' and improved strategic contribution, particularly in an environment of decreasing volumes. Procurement needs to reposition itself and lead on demand shaping and spend management - what she referred to as moving beyond procurement.
  2. Eva also told us there's a word in Germany for saving money but hurting the business. Don't ask me what the word is but I think there's a real problem that procurement people sometimes are their own worst enemies in doing just that, regardless of what the word is.
  3. Another of Eva's gems was that "procurement is only as strong as the relationships with functional colleagues". I think that's very true but there's a real problem with procurement suffering from poor stakeholder engagement and management - the focus on technical know-how, to me, is distracts from the increasingly required soft skills.
  4. There was a recurring theme from many of the speakers of splitting strategic procurement from operational buying. Their message about devolving to the right level or even outsourcing, effective use of P2P systems and pCards - in theory, that is all very simple but few really spoke of how they'd managed to get operational ownership. There is of course an interesting lesson here for those in the public sector who have been very cynical about the benefits of pCards!

Saturday, 21 September 2013

Solicitors - A cautionary tale (Part 2)

I recently set the scene regarding my introduction to acting as an Executor. One message which came through my induction was that there appeared to be a difference in my understanding of the theory and practice of the legal world. Another message was the need to remember when dealing with a solicitor you are dealing with a seller, who is not necessarily customer focussed. 

I next emailed the solicitor twice. In the first I reiterated I did not want a full service but two comparatively straight forward actions, progressing an Inheritance Tax Return and obtaining of the Grant Probate.

You may well ask why I even felt the need for the solicitor for this? Well the answer is quite straight forward, the obtaining of a Grant of Probate would have required me to be in Belfast on either a Monday, Tuesday, Wednesday or Thursday but I am only in Northern Ireland on Friday, Saturday and Sunday’s.  I had however, drafted the ITR and explained that to the solicitor.

The first email the solicitor stated:
... we feel that the proposed fee is disproportionate to the work required. If you were happy to provide an al la carte scale of charges or a capped rate for ITR and the Grant of Probate we would however be happy to reconsider? We would also be happy to receive your proposed fees for acting as solicitor in the sale of [the property]?  
A week later no reply.

Wednesday, 18 September 2013

The clothing of invisible supply chain management

It was only in April that Michael Fallon, in response to the Dhaka factory disaster, claimed the Government were going to get retailers in and find out what responsibility could be placed on retailers for their supply chain workforces. I questioned what power and appetite the Government would have for doing anything. Is anyone out their aware of what the outcome of those discussions was?

Anyway, now we learn that, if something had been committed to, it appears as if it may have been insufficient. I say that as we have now learnt of more problems in retail clothing supply chains with workers producing H&M clothing thought to be fainting, allegedly as a result of not being paid enough to buy food.

This is has a certain echo of yesterday's blog where I discussed the latest iteration of retail food supply chain failures.

As yesterday, the key lesson is that the response to retail clothing supply chain management was not effective - it failed to address what are likely to have been systemic weakness which all point to ineffective change.

The lesson for us all is that procurement risk management and contract management are not 'one offs' -they need to be embedded in culture. To me that's the question which all those responsible for procurement now need to test in their own organisations.

I also find it ironic that when giving evidence to the Public Administration Select Committee, it was advocated that public procurement should try to emulate retail procurement - perhaps that argument needs to be considered with big caveats!

Tuesday, 17 September 2013

Free range humble pie supply chains at Tesco

It's unbelievable, given the horsemeat debacle, that Tesco have now another food supply chain mess. Recall the rhetoric and assurances of lessons learnt and that customers could have confidence in UK food supply chains. We even had Government Minister's trying to sort out the mess. You may have believed the processes had been corrected and risk management and effective contract management put in place.

Yet Tesco have found themselves in another iteration of the same mess. This time supposedly Red Tractor British pork chops were found to lack the appropriate supply chain management performance. The Red Tractor label is supposed to provide an assurance of safety, hygiene and animal welfare - that mark of assurance has now been compromised by Tesco. Tesco didn't even appear aware that 'British' pork chops were actually Dutch!

'Mislabelling' seems to have become a euphemism for fraud, incompetence and inadequate supply chain management, oh yes, and over-pricing!

The key lesson here is that the response to the horsemeat crisis was not effective - it failed to address what are likely to have been systemic weakness which all point to ineffective change. Clearly the response to horsemeat has not been effective.

The lesson for us all is that procurement risk management and contract management are not 'one offs' -they need to be embedded in culture. To me that is the latest Tesco lesson. To me that's the question which all those responsible for procurement now need to test in their own organisations.

Sunday, 15 September 2013

An alternative option for school uniform procurement

First thing I heard on 'the box' today were the Lib Dems plans to break the self-inflicted monopoly power of single-source school uniform suppliers over schools. The power is derived from the schools over-specfiying on the uniform and enabling the supplier to charge excessive prices ('rents'). New guidance is proposed.  But is there a better way? I think there is.

The easy answer is to use public procurement collaborative buying and provide access to the contracts for all parents. You can still have schools differentiating on the choice of uniform, if they want but first industrialise through simplifying the uniforms, standardising, and then sharing the contracting. Those letting the contracts could view this as a social benefit. You could also look at more functional uniforms taking into consideration running costs (wear and tear, washing, etc.) and durability and refreshing.

Of course you could always use the purchase of school uniforms as part of the school curriculum. If schools want to opt out of using existing collaborative buying organisations, they could have support from local CPOs volunteering their time to support the procurement. Business Studies and Economics classes could work out which schools or public bodies it would be most advantageous to collaborate with in procurement (say, all those who want green blazers); Art and Technology classes design the uniforms. Let's face it, at the present time we have pupils leaving school who understand what marketing is about but have no grasp of procurement.

Even more radical, would it be at all possible, given the changes in child benefit, for school uniforms to be provided by the state. That would cut the nonsense of 'elitist uniform snobbery', place the uniform in the context of education budgets (after all one of their most passionate advocates in the Education Secretary) and the cost would be borne by those who insist they are necessary as opposed to locking parents into bad deals which they have no choice but to pay for.

To me the Lib Dems have missed the more innovative way of solving the problem.

Wednesday, 11 September 2013

Be wary of price comparison sites

"I'm very wary of the comparison sites because they are all gamed .."
It will hardly surprise you that those are not the words of a furry meerkat or the lyrics bellowed by some torturous moustachioed 'tenner'. However, I suspect it may well surprise you that they were the 'off-the-cuff' remarks of the Chief Executive of the Financial Conduct Authority to parliament yesterday. It will also hardly surprise you that the FCA quickly tried to distance this 'personal view' from that of the organisation.

Off-the-cuff remarks have made the news quite a bit recently and you may question how much credence should be given to them. Yet it strikes me that this particular remark, unlike a sanitised press statement, is probably closer to what the FCA Chief Executive actually believes and practices, than the more diplomatic rhetoric. So if the CX is wary of 'comparing the market' perhaps there is really some cause for concern.

In my private life I honestly haven't used the sites but I do carry out my own market research online and value the ease of access to information from the internet - yes, that approach helps me beat the price comparison sits in achieving the best deal for me.

But let's think about the mantra that greater transparency of actual spend data improves public sector efficiency as a result of 'empowering the armchair auditors'. As someone who has tried to interrogate some publicly available public spend data, I don't believe for one minute those publishing the data pay any more than lip-service to primary objective. I view it as the victim of obfuscation, protectionism and defensiveness. Think 'turkeys and Christmas'. Yet the aspirational transparency brings a cost paid for by  the very armchair auditors who don't appear to be using it in droves. Therefore,  I would really like to see the evidence that the desired outcomes of the 'transparency' have been achieved.

However, as a procurement practitioner I am also wary of the procurement version of price comparison sites.

Tuesday, 10 September 2013

3 SoS, 3 Presidents and 1 PM: A negotiation masterclass

Set aside which side of the fence you sit on regarding intervention in Syria and think are there any lessons which can be transferred across to procurement?

I have already discussed lessons from the House of Commons Syria vote, so let’s ratchet up a gear and consider three Secretaries of State, three Presidents, one Prime Minister, and negotiation.

First a quick paraphrased catch-up. Terrible atrocities taking place in Syria. Almost impossible for the average ‘Man on the Clapham Omnibus’ to understand who are the good guys and the baddies in the Civil War. Evidence of chemical weapons having been used but no clear ownership of the smoking gun. The US President attributed blame to the Syrian President and announces a swift, short, sharp punishment is required to make clear chemical weapons cannot be used. While this was being discussed a team of weapons detectives were on the ground in Syria hoping to find the evidence (their verdict still awaited). US President looks for support in the proposed punishment beating. There is no evidence that that the US have been attacked in anyway, nor any Western country but to take the moral high-ground a missile aimed at the Syrian President’s lawn is deemed appropriate. The Russian President makes his lack of support for US intervention clear. UK decide some sort of Parliamentary Mandate is required but it is not yet gained. UN mandate is not yet received. Some petty point scoring with potential allies. The US President starts to look very lonely and decides he would be better with mandates from Congress and the Senate – not yet received. The US President is backed into a corner, the UK Prime Minister is backed into a corner, the Syrian President waits. In the meantime airmiles are built up holding a G20 summit, bringing some of the world's top politicians and their advisors together, fails to find a way forward.

So the scene is set to learn from the high stakes negotiation, very high stakes negotiation.


Saturday, 7 September 2013

M&S Bizarre ways

It never ceases to amaze me when I read the bizarre M&S label which extols 'Inspired by Italy' - what does such a bizarre claim really mean?

We know M&S has diversified and is now a bank - you can get one of their credit cards with an APR of 16.9% - I wonder what Mr Marks and Mr Spencer would have thought of that diversification strategy and the idea that customers would pay over the odds to acquire something today and then pay later. But then Mr Marks & Mr Spencer grew up in different times - banks were the friends of business and they didn't bring businesses and countries to their knees.

Mr Marks & Mr Spencer may also find the whole talk of a  'Plan A' which addresses CSR quite bizarre. That's a long way from haggling with their suppliers then handing over the cash. But like 'Inspired by ...' what do such claims really mean?

I suspect Mr Marks & Mr Spencer would find it not only bizarre but be appalled by the notion of refusing to pay their suppliers in a reasonable time.

Yet now we see the convergence of banking, CSR, supply chains and a firm going through a mid-life crisis. The result, in spite of being signed up to CSR, and the Prompt Payment Code is to reach for the contract terms and beat the small guy over the head. So now it appears M&S have depersonalised business relationships and told their clothing suppliers they will slow down their payment, from 60 days to 75 days after receipt of goods. While supply chain financing is being viewed elsewhere as a panacea (and ironically M&S have made that commitment too) something seems to have got lost on the road to recovery with M&S. We can only assume suppliers will suffer, and that all the talk of M&S being committed to ethical trade has got lost in translation. Like 'Inspired by ...' what does M&S commitment really mean?

Now here's a dilemma: is it ethical to charge your customers 16.9% APR to buy your goods and then delay paying your suppliers within say 30 days, but not pay your suppliers 16.9% APR for the delayed payment?

Ethics and behaviour at M&S, to Mr Marks and Mr Spencer, may appear very, very bizarre.

Thursday, 5 September 2013

Universal Credit's contract management seems lost in space

I doubt if anyone truthfully expected the NAO Early Progress Report on Universal Credit to be singing its praises – life just isn’t like that. However, tucked away within the woes of the implementation are the added miseries of procurement and contract management.

Universal Credit isn't only one of the Government's flagships, it is one of the Cabinet Office's 12 major programmes - as such it is critical that it acts as a 'how to' exemplar. 

It is hard to believe that a more holistic approach to procuring the IT systems wasn’t pursued. That failure contributed to £34m of new assets being written off. Serious questions should be asked to establish if that £34m write-off could have been avoided, had the procurement approach been to look over the life of the programme as opposed to a narrow pilot. Did the suppliers warn of this potential waste?

Then we see a recommendation:
The Department should improve its ability to challenge suppliers and reduce its reliance on suppliers for important decisions (p.10). 
You will recall the tough talking of 2010 when Francis Maude summoned some of the top suppliers and read the riot act

Wednesday, 4 September 2013

Solicitors - A cautionary tale (Part 1)

Sadly my mother died recently of Alzheimer's. This introduced me to the world of actually fulfilling my role as an Executor. Carrying out the role of Executor isn't some black art and there are many sources of online support which can easily help navigate you through the process. Having said that we have now learnt that the average 'cost of dying' has increased 7.1% over the last year and now amounts to over £7,000.

I may well write a number of posts on my experience of dealing with the legal profession but today I will just deal with a few which address elements that have been at the centre of me purchasing and procurement career since the 70s, namely, Invitations to Treat, Offer and Acceptance, when a contract is in place and value analysis.

I have studied contract law in many forms over the years and thought I had a reasonable grasp of some of the principles, yet I now see the world slightly differently - here's a cautionary tale (Part 1).

My belief was always that there had to be certainty regarding the contract before it is valid. I met with the solicitor, and after that meeting questioned what was actually going to be delivered. I wrote:
Can you help by identifying what all [the firm] plan to do - my brother and I are concerned that this isn't overly complicated given that we're so far below the Inheritance Tax Threshold and we've managed to handle all my mother's affairs up until now. 
I received this response - worth nothing is the lack of clarity on what was to be delivered and how much it may cost:

Monday, 2 September 2013

'Smaller, Better, Faster, Stronger' - Raises the bar for public procurement?

Today's Times declared "Switching from paper to online might save Government £70bn" and there was mention made of procurement. The Title: 'Smaller, Better, Faster, Stronger: Remaking government of the digital age"  was captivating, and Twitter implied the Policy Exchange's report was a must read for anyone interested in public procurement. The scene was set of a document raising the bar for procurement.

Set aside that the Foreword is filled with political point-scoring. You discover in the Executive Summary there are three big opportunities espoused, one of which is electronic purchasing. Reference being made so early to 'purchasing' should have rang warning bells, but hey, we're still talking about BIG OPPORTUNITIES in the government use of digital and this "is primarily concerned about the big-picture priorities for the 2015 parliament" (p.14) regardless of who governs.

A fairly selective literature review comprises Chapter 2 - strange not much reference to the body of knowledge. policy and strategy relating to eProcurement in the public sector!

76 pages - yet really only page 36 and part of page 37 discuss the BIG OPPORTUNITY of 'purchasing'!