David MacEachern is a director with the executive search firm Spencer Stuart and is the leader of the firm's global transportation and third-party logistics practice.
Countless corporations have centralized
their procurement operations over the
past several years. Typically, the switch from a
local or regional procurement structure to a
centrally led organization headed by a chief
procurement officer (CPO) has occurred in
global, established industry leaders in manufacturing's
high-tech, industrial, and consumer
sectors. But now, more and more nonmanufacturing,
service-driven companies are
also adopting this approach.
Through our recruiting work for Spencer
Stuart's Supply Chain Practice, we've
observed a recent trend toward CPO searches
by organizations across many of these
industries, including financial and service
organizations, insurance and real estate companies,
banks, health care providers, gaming
industry leaders, and hospitality firms. The
reason for their interest in centralizing
oversight of procurement is that,
despite their best efforts, they have
found it challenging to grow or maintain
their top line during the economic
downturn. Looking to preserve their
margins, they are reassessing their operational
efficiency and the effectiveness
of their supply chains like never before.
It's not unusual for many of these
companies to initially have only a general
idea of their overall organizational
spend. We have been engaged by some
that can only estimate their spending,
telling us, for example, that it is "somewhere
between US $2 billion and $3
billion." Needless to say, the strategic
application of centralized procurement
in these corporations represents a huge
opportunity.
When creating a new chief procurement
officer role, some of these organizations
initially view it as a "cost of
doing business" function. Only later do
they recognize that the CPO is capable
of achieving much, much more. These
new CPO roles in service-driven organizations
focus not only on spending across marketing,
travel, information technology, consulting,
real estate, security, transportation,
and similar areas but also on enhancing customer
satisfaction, quality, and on-time delivery.
In many cases, the chief procurement
officer has become a key strategic leader and
advocate for greater operational effectiveness
in everything from inventory to manufacturing,
product design, cash flow, outsourcing,
workflow, quality, and customer service.
Leadership skills required
Given the strategic role that CPOs are now
playing, where are companies looking for the
leaders to fill these positions? We are seeing
people enter the procurement function from a
variety of backgrounds: from finance, from
general management, from broader supply
chain roles, and even from the sales or commercial
side of the business. Typically, however,
companies recruit talent at the CPO level
from best-in-class procurement organizations
at other leading industrial, manufacturing,
technology, or consumer organizations.
These stars of procurement are drawn to
newly created CPO roles because they see an
opportunity to effect dramatic organizational
change. In organizations that are just establishing
centralized procurement, a CPO can
experience the challenge of building a procurement
organization from the ground up. He or she can also make changes that have
the potential to transform an organization's
effectiveness, contributing millions—or even
hundreds of millions—of dollars annually to
the bottom line.
It is not a given, however, that a CPO will
succeed in making such a huge organizational
impact. A switch to centrally led procurement
represents a profound change in the
role procurement plays in the organization.
Instead of being brought in after business
decisions have been made and tasked with
implementing them cost-effectively, the CPO
is a strategic business adviser and an integral
member of the senior leadership team.
To successfully effect this transformation to
centrally managed procurement, the CPO
needs a number of critical capabilities,
including:
Outstanding strategic skills. The chief
procurement officer must be able to take a
global view of the entire business and marketplace
to develop a procurement
vision and strategy
that aligns with the company's
business needs, both for
today and for the future. The
CPO also needs a comprehensive
understanding of
the ramifications of different
strategic options for all of
the critical moving parts of
the business, and he or she
must be able to help decision
makers understand the
advantages and disadvantages of different
approaches and models.
Superior leadership. A transformational
CPO needs to be one of the most capable leaders
in the organization. He or she must be able
to play a guiding role in early-stage discussions
on how to implement core business strategies in
an effective, economical way. The CPO will
then be called upon to engage the wider organization
in the overall procurement opportunity,
build cross-functional teams, and communicate
procurement strategies and priorities across the
organization in a compelling manner.
Influencing skills. The CPO must become
a valued partner and a recognized asset who
collaborates effectively across different organizational
levels, functions, businesses, and geographies
to realize procurement goals and objectives.
He or she also has to be able to influence
top-level management—a skill needed to keep
executives from putting up "fences" that can
stall a procurement initiative.
Results orientation. The CPO cannot
accept "no" for an answer and must demonstrate a drive and passion for continuous
improvement in processes, relationships, and
cost savings. He or she must be creative, persistent,
and always setting goals for the team.
Most importantly, the CPO must produce
definitive metrics that demonstrate the success
of procurement initiatives to the chief financial
officer (CFO) and chief executive officer
(CEO). A CPO also needs to be proactive in
communicating these results to galvanize the
interest of others in the
organization in how procurement
can help them succeed.
Organization building. A global procurement leader
must be able to assess the organization's existing capabilities and attract
experienced leaders to fill any gaps. He or she must be able
to create global transparency where it may have been only
regionally available before, and be capable of
aligning practice and policy across the function
as well as across the broader organization.
Armed with these skills and with their functional
expertise, chief procurement officers are
having a dramatic impact on the overall efficiency
and short- and long-term profitability of
many companies. A centralized model may not
be the answer for every organization. But the
recent embrace of this approach to procurement
by a multitude of companies that had not
tried it before signals the emergence of a powerful
trend. It's something that all companies of
significant scale should at least consider closely,
or risk finding themselves at a competitive
disadvantage.
The port worker strike that began yesterday on Canada’s west coast could cost that country $765 million a day in lost trade, according to the ALPS Marine analysis by Russell Group, a British data and analytics company.
Specifically, the labor strike at the ports of Vancouver, Prince Rupert, and Fraser-Surrey will hurt the commodities of furniture, metal products, meat products, aluminum, and clothing. But since the strike action is focused on stopping containers and general cargo, it will not slow operations in grain vessels or cruise ships, the firm said.
“The Canadian port strike is a microcosm of many of the issues that are impacting Western economies today; protection against automation, better work-life balance, and a cost-of-living crisis,” Russell Group Managing Director Suki Basi said in a release. “Taken together, these pressures are creating a cocktail of connected risk for countries, business, individuals and entire sectors such as marine insurance, which help to mitigate cargo exposures.”
The strike is also sending ripples through neighboring U.S. ports, which are hustling to absorb the diverted cargo, according to David Kamran, assistant vice president for Moody’s Ratings.
“The recurrence of strikes at Canadian seaports is positive for U.S. ports that may gain cargo throughput, depending on the strike duration,” Kamran said in a statement. “The current dispute at Vancouver is another example of the resistance of port unions to automation and the social risk involved with implementing these technologies. Persistent disruption in Canadian port access would strengthen the competitive position of US West Coast ports over the medium-term, as shippers seek to diversify cargo away from unreliable gateways.”
The strike is also affected rail movements, according to ocean cargo carrier Maersk. CN has stopped all international intermodal shipments bound for the west coast ports of Prince Rupert, Robbank, Centerm, Vanterm, and Fraser Surrey Docks. And CPKC has stopped acceptance of all export loads and pre-billed empties destined for Vancouver ports.
Connected with the turmoil, Maersk has suspended its import and export carrier demurrage and detention clock for most affected operations. The ultimate duration of the strike is unknown, but the situation is “rapidly evolving” as talks continue between the Longshore Workers Union (ILWU 514) and the British Columbia Maritime Employers Association (BCMEA), Maersk said.
In addition to its flagship Clorox bleach product, Oakland, California-based Clorox manages a diverse catalog of brands including Hidden Valley Ranch, Glad, Pine-Sol, Burt’s Bees, Kingsford, Scoop Away, Fresh Step, 409, Brita, Liquid Plumr, and Tilex.
British carbon emissions reduction platform provider M2030 is designed to help suppliers measure, manage and reduce carbon emissions. The new partnership aims to advance decarbonization throughout Clorox's value chain through the collection of emissions data, jointly identified and defined actions for reduction and continuous upskilling.
The program, which will record key figures on energy, will be gradually rolled out to several suppliers of the company's strategic raw materials and packaging, which collectively represents more than half of Clorox's scope 3 emissions.
M2030 enables suppliers to regularly track and share their progress with other customers using the M2030 platform. Suppliers will also be able to export relevant compatible data for submission to the Carbon Disclosure Project (CDP), a global disclosure system to manage environmental data.
"As part of Clorox's efforts to foster a cleaner world, we have a responsibility to ensure our suppliers are equipped with the capabilities necessary for forging their own sustainability journeys," said Niki King, Chief Sustainability Officer at The Clorox Company. "Climate action is a complex endeavor that requires companies to engage all parts of their supply chain in order to meaningfully reduce their environmental impact."
Supply chain risk analytics company Everstream Analytics has launched a product that can quantify the impact of leading climate indicators and project how identified risk will impact customer supply chains.
Expanding upon the weather and climate intelligence Everstream already provides, the new “Climate Risk Scores” tool enables clients to apply eight climate indicator risk projection scores to their facilities and supplier locations to forecast future climate risk and support business continuity.
The tool leverages data from the United Nations’ Intergovernmental Panel on Climate Change (IPCC) to project scores to varying locations using those eight category indicators: tropical cyclone, river flood, sea level rise, heat, fire weather, cold, drought and precipitation.
The Climate Risk Scores capability provides indicator risk projections for key natural disaster and weather risks into 2040, 2050 and 2100, offering several forecast scenarios at each juncture. The proactive planning tool can apply these insights to an organization’s systems via APIs, to directly incorporate climate projections and risk severity levels into your action systems for smarter decisions. Climate Risk scores offer insights into how these new operations may be affected, allowing organizations to make informed decisions and mitigate risks proactively.
“As temperatures and extreme weather events around the world continue to rise, businesses can no longer ignore the impact of climate change on their operations and suppliers,” Jon Davis, Chief Meteorologist at Everstream Analytics, said in a release. “We’ve consulted with the world’s largest brands on the top risk indicators impacting their operations, and we’re thrilled to bring this industry-first capability into Explore to automate access for all our clients. With pathways ranging from low to high impact, this capability further enables organizations to grasp the full spectrum of potential outcomes in real-time, make informed decisions and proactively mitigate risks.”
Third party logistics provider (3PL) C.H. Robinson has applied generative AI tools to automate various steps across the entire lifecycle of a freight shipment, the Minnesota company said last week.
C.H. Robinson said it created AI-based technology that reads incoming email then replicates tasks a person would do, including giving customers a price quote, accepting a load, setting appointments for pickup and delivery, and checking on the load in transit. The company has used the approach to automate more than 10,000 of those routine transactions per day, allowing shippers who use email to get the same speed-to-market and cost savings as customers who use C.H. Robinson’s online platform.
After starting with price quotes, the company said it has applied generative AI to increasingly complex tasks. “We announced in May that we’d been using our new tech for emailed price requests. Within a few short months, we created new models to automate more shipping steps and have already implemented them at scale,” Arun Rajan, the company’s Chief Strategy and Innovation Officer, said in a release. “This a major efficiency breakthrough for the industry and for supply chains around the world. When you think about retailers that need hundreds of different products on their shelves or automakers that rely on just-in-time delivery for the 30,000 different parts in a car, saving hours and minutes on every shipment matters.”
The technology also saves time, cutting the task for a person to take care of an emailed load tender from as much as four hours to 90 seconds, according to Mark Albrecht, the company’s Vice President for Artificial Intelligence.
“Once a person got to the email in their inbox, it still took an average of seven minutes to manually enter all the shipment details into our system – and that’s for a single load,” Albrecht said. “If the email tendered us 20 loads, a person would be stuck manually entering the information one load at a time. With generative AI, we can process all 20 loads simultaneously in the same 90 seconds. That’s an enormous time savings, especially when you consider we’ve scaled this to thousands of shipment orders per day just since June.”
An overwhelming majority (81%) of shoppers do not plan to increase their holiday spend this year over last year, revealing a significant disconnect between retail marketers and shoppers in the weeks before peak season, according to online shopping platform provider Rakuten.
That result flies in the face of high confidence levels from retailers who have been delaying their marketing spend, as 79% of marketers are optimistic they will reach holiday sales objectives, and 65% are timing their spend as late as November.
However, consumers are nervous about supply chain disruptions. Almost half (42%) of shoppers have started their shopping early to avoid shipping delays, while 32% plan to do more shopping in-store to avoid potential delays. The results come from a survey conducted online within the U.S. by The Harris Poll on behalf of Rakuten from Sept. 5 – Sept. 9 , among 2,100 consumers aged 18 and older and 101 retail marketers.
"There's a clear disconnect between marketer perception and consumer realities, but this presents a unique opportunity for retailers to capitalize on the shortcomings of their competition," said Julie Van Ullen, Chief Revenue Officer at Rakuten Rewards. "As shoppers plan to spend less overall, there become fewer opportunities for retailers. This makes it evermore important for retailers to invest in strategies that set them apart throughout the entire holiday season.”
Three reasons behind the diverging views are:
Inflated prices. Even with softening inflation rates, nearly half (46%) of shoppers report that it will have the greatest impact on their holiday shopping strategy. Conversely, only 20% of marketers believe that to be true.
Election nerves. Shoppers anticipate that the upcoming election will have an impact on inflation, with 57% believing it will increase.
Weak brand loyalty. A majority of marketers (98%) believe shoppers will remain loyal to brands, but fully 42% of shoppers indicate they will prioritize finding the lowest prices by trading down to lower-quality brands and products for more affordable alternatives.
"Loyalty is up for grabs this holiday season, and success for retailers will hinge on offering value beyond just reduced prices," Julie Van Ullen, Chief Revenue Officer at Rakuten Rewards, said in a release. "Our research revealed that shopper concern extends beyond just price, and retailers will need to address those concerns with comprehensive deals that include several table-stake incentives. Incentives like free shipping, buy now pay later services, and elevated Cash Back will be important for maintaining a loyal shopper base."