A few weeks ago, I filled in for supply management and negotiation guru and Vantage Partners Partner, Jon Hughes, at the invitation-only Procurement Leaders Forum in Chicago to co-deliver a presentation entitled, “Leveraging Supplier Collaboration to Drive Innovation,” that discussed strategies in developing innovation within a supply base and a case study review of the work that Vantage Partners had done with Kellogg’s in this area. My co-presenter was Cathy Kutch, Strategic Director of Supplier Relations and 22-year veteran at Kellogg’s; also a Coldplay fan.

Innovation is such a wonderfully powerful word and such a wonderfully broad concept. It is simple and complex. It is market-driven and engineering-led. It creates markets and dilemmas. It is important. It can be continuous or disruptive. It can be continuously disruptive. It was Monday’s topic, in part. It is today’s topic.

You can argue that there are three primary paths to fostering innovation:

1. Attract people and groups with innovative ideas – Offering engineers “20% time” has helped Google become a magnet for creative types (having a stock that’s up one million-percent also doesn’t hurt). Google credits many of their innovative products to this program.
2. Monitor markets where innovation is likely to occur; then source or buy it – Fellow IU alum, John Chambers has been a consistent acquirer of innovation (Cisco also shakes the trees internally looking for innovation).
3. Work to develop innovative solutions with trading partners – This “path” is today’s topic.

LONDON, 06 April 2010 - CHEP, the global leader in pallet and container pooling services has awarded a five-year procurement outsourcing contract to Xchanging /quotes/comstock/23s!e:xch (UK:XCH 198.50, +1.70, +0.86%) , one of the largest and fastest growing global business processors. CHEP operates in 45 countries, serving customers in diverse sectors. Their global partners include Procter & Gamble, SYSCO, Kraft, Nestle, Ford and GM. The company has more than 7,500 employees.

As part of the contract, Xchanging will manage GBP 75 million of spend per annum (GBP 375 million of spend over five years) on behalf of CHEP Europe and help integrate and standardise procurement processes for CHEP's business across the UK, France, Germany and Spain for their non-core categories. Xchanging will consolidate spend management and help reduce overall non-core procurement costs across CHEP's European businesses. The contract will include sourcing of non-core categories and a large proportion of procure-to-pay activities.

The past decade has seen a massive boom and bust on the global sourcing front. Scores of companies moved as much spend offshore as possible only to find that the total costs of doing business with suppliers halfway around the world was only worth it if they were serving local markets. Granted, in certain industries (e.g., textiles, apparel, high-tech manufacturing, etc.) global sourcing is now largely the norm, often because entire supply markets have moved abroad and local options no longer remain a choice. The US television market is a great example. Three decades ago, close to 100% of the televisions sold in the US were made in the US. Then the entire market moved offshore, initially to Japan, but now to other regions as well. In other industries, however, companies are increasingly re-examining how best to balance the local and global components of their supply chains.

If you're curious about the latest trends in global sourcing, a recent Industry Week article sheds some useful light on the latest trends in the market. Quoting a study from Grant Thornton -- who is not exactly known as a research powerhouse in the global sourcing arena -- the article suggests that global sourcing is here to stay, yet is far from the only option that companies are considering. As a summary of the study, Industry Week suggests that 82% of respondents "indicated that some portion of their supply chain is purchased internationally, up from 77% last year." In addition, "China remains the front-runner choice, with 28% sourcing from that country, up from 22% last year. What was the most interesting is only half of the firms surveyed (49%) have found international sourcing to produce a positive ROI."

In recent weeks, PIU Insight has been dominated by stories about sourcing in China. This in itself is no surprise; the world's second-largest economy is engrained in the purchasing process of just about everything we buy. Everything we purchase from elastic bands right through to the most sophisticated component parts for our factories and power plants wear the 'Made in China' badge. 

However, in a sea of Chinese sourcing success stories, one article this week did catch my attention. Forbes Business ran a piece suggesting that Vietnam may soon provide a viable option for organisations looking to make the most of low-cost sourcing opportunities in Asia. The article concentrated primarily on the benefits and potential risks associated with sourcing in Vietnam. The article did mention that the desire to source in Vietnam was driven by a belief that organisations were looking to move away from the traditional sourcing hub of China.

As CPO of online search giant Yahoo, Ron Carcamo is deeply involved in trying to increase procurement's influence over and involvement in the wider business.

I spoke to him about the challenges this brings and how he's pulled procurement much closer to finance.

Listen to the interview below.

The Department of Health says it is to make cuts of £4.35bn over three years in an "efficiency savings" drive.

It is the biggest contribution to £11bn of government savings announced in last year's pre-Budget report.

The Ministry of Defence will cut costs by £700m, education by £1.1bn and work and pensions by £500m.

They say they can do so by moving civil servants out of London, reducing staff sickness and use of consultants but the Tories say it is a "bogus argument".

Some departments, such as health and children, schools and families, will reinvest the savings into "front line" services.

Tories pat small biz heads in open source IT procurement pledge

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Claims Conservative government would cap tech +£100m contracts

By Kelly Fiveash • Get more from this author

Posted in IT Channel, 11th March 2010 13:15 GMT

Shadow chancellor of the exchequer George Osborne claimed today that the Conservative party, if elected to form the next government, would meet its "ambition" of ensuring that the next generation of "Googles, Microsofts and Facebooks" were British companies.

The Tories pledged in their technology manifesto that they would be the "first country in Europe to extend superfast 100 mbps broadband across most of the population".

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If David Cameron's party is invited by HRH the Queen to form a government following a general election that many expect to happen on 6 May, the Tories claim they will publish a litany of expenses online.

The Conservatives would cough up central government and quango spending on anything over £25,000, all UK.gov tender documents for contracts worth over £10,000. Every item of local government spending over £500 will also be published, according to the manifesto.

As success stories go, there are those that have long-standing, highly effective supply chain management systems (Toyota might have been the example, not that long ago) and then there are those that have fundamentally improved on what they had before. Which brings us to ITV.

It was reported last May that ITV’s previous procurement policy was due an overhaul by incoming group procurement director Angela Porter. She recalled that the policy then was limited to an A4 page and internal business units only used procurement when they wanted to.

Around 10 months later, the policy has been reshaped and repositioned completely (something we’ll be speaking to Porter about in the next couple of weeks).

The result? the group has demolished its £16m savings target, an announcement that emerged last week as the broadcaster announced £25m profits. (This contrasts sharply with the comparative £2.7bn losses experienced in 2008.)

I'm a big fan of collaboration between supply chain financing and procurement/accounts payable to reduce supply risk and enable vendors to access working capable at more reasonable rates. I'm even a fan of The Receivables Exchange, one of the pioneering providers in the space. I'm not a fan, however of its marketing techniques to suppliers, which remind me of the type of pitch that a loan shark or used-car salesman might use if they had access to my email. For this Friday rant, I'll present a string of emails I received from a TRX account rep, and let you draw your own conclusions. I've added my own comments (in caps and brackets).