Managing Relationships with Suppliers through Brexit Wins Loyalty and Trust for Procurement

By Nikita Saharia Chaturvedi

It came as a shock to the world, when on June 24, 2016, citizens of the United Kingdom voted to leave the European Union putting an end to a  40-year relationship. Known as “Brexit,” the aftermath of this step showed its mark in the money market, with the pound falling against the dollar. The repercussions of Britain’s exit from the EU, will be felt worldwide, as it’s the fifth largest economy in the world.

My Purchasing Center digs deeper into the much talked about exit of the UK, with Bindiya Vakil, Founder and CEO of Resilinc in a new podcast in which she examined the supply chain implications of Brexit.

Today we live in a globalized world where merchandise is multi-national and raw materials and parts used to make them originate in nations all over the world.  “For example, a typical car may have parts originating from as many as 30 countries,” Vakil says. “The rules and regulations that govern international trade are a critical element of supply chains and of particular interest to procurement professionals who manage these complex relationships.”

The Brexit vote could have quite an effect on the overall supply chain impacting each and every aspect of it.

As one of the more globalized economies, the UK makes up 4% of world GDP. In 2014, was the ninth-largest exporter ($503 billion in 2014) and the fifth-largest importer ($802 billion in 2014). As such, some serious issues  could arise for companies headquartered or manufacturing in the UK

From a procurement angle, more than 50% of the UK’s $500 billion in exports are bound for the European Union. With present account shortfalls at record levels, this fundamentally implies that the UK-based supply chain is profoundly reliant on access to the EU single market to sustain its vigorous financial health.

Qualms about the pound could bring procurement challenges, which will vary with a company’s dependability on the resources they source from  the UK. Deutsche Bank has cautioned that the pound could drop further, and threaten inflation levels may get to a 25-year high of 5.2%.

Suppliers manufacturing within the UK that don’t import raw materials, but export finished goods should be able to offer price reductions to customers.   At the same time, those that import materials and export may suffer monetary losses and falling gross margins as they may end up paying more for imported goods due to currency devaluation.

No wonder Brexit poses challenges. Acquiring affordable skilled labor is another concern. It may become more costly to hire, further squeezing margins for struggling businesses. As Vakil sees it, limited movement of labor is expected to play a large role in the availability of cheap and affordable labor and is a deterministic factor in Reslinc’s prediction of the decline of manufacturing activity within the UK. “In coming months, we expect most global companies with manufacturing facilities in the UK to consider plans to relocate operations in anticipation of upcoming labor shortages” she says.

On the other hand, UK exporters may no longer enjoy fast clearing through Customs.

“Brexit put trade deals into question, and what this means for many companies, is that their total landed cost will now be substantially different, if higher tariffs get imposed by the UK as a non EU member,” Vakil says.  “Once the new rules are implemented, in the mid-term, logistics professionals could expect greater customs clearance timeframes on products exported to the EU.”

Brexit Opportunities and Risks for Supply Chain

The vote presents opportunities and risks for supply chain. Key risks being the following:

• Component prices going up.

• Landed cost of products increasing medium term with new tariffs going into play.

• Cost of labor and other essentials increasing in an inflationary scenario.

• Suppliers going into financial distress.

Brexit may also open doors for supply chain and procurement professionals who understand the supplier base and supply chain mapping. For instance, some may now find EU markets more accessible, with minimal tariffs, as low currency rates might prove to be very advantageous to exporters. They can use this opportunity to lock in lower prices with suppliers, if possible and applicable, particularly for high spend components originating in the UK, Vakil says.

Wealthy companies with the financial wherewithal to withstand a few years of uncertainty are likely to find that many basically solid and vigorous UK businesses are abruptly excellent acquisition targets while the currency is  so favorable. Many Chinese, Indian and U.S companies on expansion sprees across Europe could benefit.

In summary, one must have thorough knowledge of the supply chain to sustain resiliency. To track performance, companies must know their tier 1 suppliers located in the UK and UK-based sub-tier suppliers they depend upon. Vakil suggests procurement professionals keep an eye on U.K.- based supplier and sub-tier supplier operational and financial metrics,  watching for early indicators of problems, particularly weak financials.

For critical suppliers, Vakil suggests preparing robust extenuation strategies and timeframes to implement them. Furthermore, “a very significant discipline in possibly rough times is to invest in strong supplier relationships: Resilient suppliers equate to continued supply. Customers who work closely with suppliers during tough times win their loyalty and trust”.

Listen to the My Purchasing Center podcast, Brexit Risk and Opportunity: Understand Supply Chain

Pharmaceutical Supply Chains Can Be Complex; FusionOps Aims to Help.

By Nikita Saharia Chaturvedi

FusionOps, provider of supply chain analytic applications, recently announced FusionOps Pharma, a new analytics suite specifically designed for the pharmaceutical business. The new cloud solution provides pharmaceutical companies with an end-to-end view of their supply chain to help increase margins and improve patient value.

To learn more, we spoke with Allen Jacques, Vice President of Pharmaceuticals at FusionOps, in a new podcast at My Purchasing Center, FusionOps Pharma: Analytics for Pharmaceutical Supply Chains.  

The pharma industry faces unmatched challenges and pharmaceutical supply chains are intrinsically complex. There is an unmet need for speedy, unified end-to-end visibility and cross-functional analytics that is now available with FusionOps Pharma. Corporations are now able to continually monitor the wellbeing of their supply chains, recognize areas that need consideration, and rapidly perform root cause analysis. From the boardroom all the way to the shop floor, organizations will have the information quintessential to make right decisions and applicably influence outcomes.

FusionOps Pharma supplements the company’s platform by adding analytics around namely:

• Product and customer segmentation to modify supply chain strategy to  products patent-protected or generic.

• Balancing of inventory and service-level objectives. With visibility and analytics, companies can find opportunities for inventory reduction and rebalancing while maintaining high service levels.

• Improving end-to-end cycle times from API (Active Pharmaceutical Ingredient) to customer delivery by understanding total performance and the components that drive that performance. Cycle-time reduction efforts will be focused on the right manufacturing and quality processes.

• Forward-looking reporting and analytics using a company’s planning data which will allow pro-active management and drive achievement of supply chain objectives whether they be service level targets, product growth, inventory targets, etc.

“We have focused on providing the analytics that matter the most to pharmaceutical companies in terms of impacting revenue growth, cost and working capital,” Jacques tells My Purchasing Center. “These reports and analytics provide end-to- end visibility functionally across plan, source, make and deliver and  physically across all nodes of the supply chain from raw material to API to WIP (bulk tablets, vials, etc.) to finished goods.”

What’s more, FusionOps Pharma is a 100% cloud solution wherein both customer data and the FusionOps application are hosted in a safe, SSAE 16 audited data center. Powerful integration and data-blending technology empowers customers to swiftly excerpt and synchronize data from multiple ERP systems (and other sources) into a comprehensive view of supply chain performance. This is particularly important for the pharmaceutical industry where intense merger activity has resulted in companies having multiple ERP environments that are difficult to report across. The FusionOps Cloud also includes a big data database and pre-populated metrics, which significantly speeds up time to market for delivering supply chain analytics to the business.

Listen to the My Purchasing Center podcast, FusionOps Pharma: Analytics for Pharmaceutical Supply Chains.

– See more at: http://www.mypurchasingcenter.com/technology/technology-blogs/pharmaceutical-supply-chains-can-be-complex-fusionops-aims-help/#sthash.xPkDhMdq.dpuf

Early Supplier Payment: Problem Solver, Opportunity.

By Nikita Saharia Chaturvedi

Late last month, we spoke with Bob Cohen, Vice President, North America at Basware. He’s excited about a new tool that allows buyers and suppliers to optimize invoice payment terms for better working capital management called Basware Discount.

As a service on the Basware Commerce Network, more than 1 million businesses will be able to benefit from early payment terms, managed online in real time. The service is dynamic in that it offers payment terms on a sliding scale; the earlier the buyer makes payment, the bigger the discount.

Basware Discount is something that customers have been asking for and Basware has been working on for some time, Cohen tells My Purchasing Center in a new podcast interview. “We think that it should have a very beneficial effect for our customers and their suppliers,” he says.

Dynamic discounting, which Cohen describes as synonymous with early payment, enables suppliers to get paid quicker. “Offering early payment to suppliers is both an opportunity and a problem solver,” he says.

As procurement managers know, suppliers often contact their offices asking about the status of their invoices. Smaller suppliers, in particular, may need the cash to run their businesses because they may not have much working capital. Receiving payment early allows them to reinvest in their businesses sooner.

For customers on the Basware Network to pay their suppliers electronically, they first need to onboard their suppliers. Basware has a team that’s able to do this one at a time or en masse, Cohen says, explaining that the company tries to make this as easy as possible. Once onboarded, suppliers can take advantage of different options, including Basware Discount, he says.

As Cohen sees it, use of Basware Discount provides opportunity for procurement. “If buyers can pay suppliers early, suppliers will be happier and the relationship will be stronger.”

Listen to the My Purchasing Center podcast with Bob Cohen, Product News: Basware Discount Helps Improve Relationships

Also see the My Purchasing Center articles, Procurement Takes Lead in Technology Turnaround and Excess Cash? Consider Paying Suppliers Early

– See more at: http://www.mypurchasingcenter.com/technology/technology-blogs/early-supplier-payment-problem-solver-opportunity/#sthash.G2e3dLjA.dpuf

Procurement Role in Risk Management Growing

By Nikita Saharia Chaturvedi

Organizations–particularly procurement teams–are relying more and more on technology to manage data. They are using technology to assess, analyse and have full visibility into their suppliers.  “Many of our clients are making investments in technology to help support these needs,” says Rose Kelly-Falls, Senior Vice President, Supplier Risk Management at Rapid Ratings International.

“In addition, we are hearing more and more about the regulatory and compliance requirements many industries are facing.” This can be a drain on resources internally as organizations need to familiarize themselves with new requirements as well as implement and manage them – it is becoming overwhelming. Another emerging trend in 2015 is that procurement is now playing a much bigger role in risk management. In the past it seems that just attending risk-related meetings was the expectation, but now procurement is being asked to provide more guidance and insight to the business.

In fact, CPOs are being asked to act as an advisor as the risk strategies are being developed. This is a significant change compared to what we have seen in the past. Kelly-Falls tells My Purchasing Center in a new podcast interview, “We are being faced with more and more regulations and compliance requirements that we have not had to deal with in the past. This is new to us as professionals. This was typically something that another department handled.” Supply chain professionals are being looked to as the experts. “Yes, we have dealt with SOX but now with Dodd Frank and conflict minerals reporting, the OCC guidelines for financial institutions and even with drug supply chain security, we are knee deep and being required to take a much bigger role in risk and compliance,” Kelly-Falls says.

This is not going to go away. She suggests embracing the change but be prepared for more regulations as we move into 2015. In 2015 procurement should also be aware that they  may need to have more and more visibility and transparency into the supplier base. “However, in order to achieve this and gain information you are going to have to continue to build very strong relationships with your suppliers,” Kelly-Falls says.  And, perhaps more important, determining critical suppliers should not be done by spend.

“Organizations need to be thinking about the revenue impact that suppliers have on the bottom line,” she says. “That’s a paradigm shift for many organizations.” Kelly-Falls is active with the  ISM Supply Chain Risk Management Group and, in the podcast, talks about what is on tap for in 2015.  “Cathy Herr just finished 2014 as the chair, and we accomplished launching our new website which is hosted at My Purchasing Center,” she says. “Mickey North Rizza of BravoSolution is the 2015 chair. Mickey and the Board will be planning the 2015 Risk Conference which is scheduled to take place in Washington D.C. in June.

“That will be our major initiative this year. We are very excited about the speakers and topics, which we are about to finalize and release,” Kelly-Falls continues. “I can’t give away too many details but I promise there is more to come on this in the coming weeks.”

Download the My Purchasing Center podcast, Procurement: Embrace Change, Be Prepared for More Regulation – See more at: http://www.mypurchasingcenter.com/electronics/blogs/procurement-role-risk-management-growing/#sthash.er8fjr1O.dpuf

What Do Suppliers Think of Procurement?

By Nikita Saharia Chaturvedi

In one of our more recent podcast interviews, we talk with Jon Baklund, President of Baklund R&D, a small innovative tool and die shop in Hutchinson, Minnesota. In the interview, Baklund tells us what it’s like working in a family business and his experience growing up with procurement as customer.

As he explains, Baklund R&D is a progressive tool and die shop. That means the company builds progressive dies for a variety of industries. Baklund has nearly 30 years experience, receiving his early training from his Dad, who made tools and dies for 50 years. His Dad now works for him. “I learned everything I need to know from him,” Baklund tells My Purchasing Center.  In his role, Baklund works with procurement and has seen some changes over the years.

One of the more important is that lead times have gotten shorter. Leads that were 12 weeks when he first started out have shrunk dramatically. He even sees some leadtimes down to two weeks even for big projects.  “Time to market is quicker these days,” he says. “This raises concerns from procurement about quality.”  Baklund has also observed some changes in procurement’s role in the organization.

He says that procurement “used to be very connected with multiple parts of the company. Now, they operate more stand alone, apart from manufacturing and engineering.” Yet Baklund is working with engineers in procurement. “We work closely with them to understand our role so they will learn about our capabilities and accurately call on us when they need us,” he says. “If they want training, we bring them into our facility so they can see what we do. This will help build trust that we will get the job done correctly for them.”

What changes have you witnessed in the procurement/supplier relationship? Let us know! Listen to the My Purchasing Center podcast, A Supplier’s View of Procurement: Quicker Leadtimes – See more at: http://www.mypurchasingcenter.com/purchasing/blogs/what-do-suppliers-think-procurement-we-go-source/#sthash.mdWWGang.dpuf

The Government of Canada Renews Purchasing Card Contract.

By Nikita Saharia Chaturvedi

The Government of Canada has renewed its purchasing card contract with BMO Financial Group (BMO) and MasterCard, its purchasing card suppliers for the past 11 years.   BMO’s purchasing card provides payment options that streamline procurement processes by cutting costs, eliminating paperwork, maximizing working capital, and strengthening supplier relationships. As a result, the federal government can improve spend policy management and compliance.  Steve Pedersen, Vice President, North American Corporate Cards Products at BMO, recently discussed this news in an interview with My Purchasing Center.

Like most governments around the world dealing recently with austerity measures, a key component for Canada is making sure departments and agencies are optimally spending and controlling costs, Pedersen says.  “The government of Canada uses our cards to ensure that spending is directed to where it should be and not where it shouldn’t be,” he says. “Supported by reporting capabilities, we work closely with the government providing analysis to help optimize their program.”

What’s more, Pedersen credits MasterCard’s North American acceptance footprint with helping the government of Canada to eliminate the use of checks from its payment system. “It’s forefront in our ability to work with the government as it expands the program and to eliminate checks,” he says. “Without that acceptance, we would be hard pressed to help expand the program.” BMO also helps by analyzing accounts payable processes and identifying opportunities to streamline spending. The program provides suppliers with the benefit of quick payment.

To date, BMO has issued approximately 32,500 purchasing cards across 125 departments and agencies, accounting for 90% of the Canadian government’s purchasing cards. BMO Financial Group is a leading provider of commercial card and treasury solutions in North America. In addition to the recent purchasing card contract renewal, BMO has served the Government of Canada as its travel and entertainment (T&E) card provider since 2013.

Listen to the My Purchasing Center podcast interview with Steve Pedersen, Canadian Goverment Renews Purchasing Card Contract – See more at: http://www.mypurchasingcenter.com/purchasing/industry-articles/government-canada-renews-purchasing-card-contract/#sthash.H1Hgklcg.dpuf