Future disruptions

 Last time I whittered on about current crises.

And (pessimistically) said that there are more to come.

Ok, so what do I think they are?

First, obviously, is climate change.  It is time to stop pretending it is not happening.  We can moderate the impact, and work to slow the change.  The time is right because renewable energy is also energy less dependent on fossil fuels, and so strategically acts to limit the impact of oil/gas disruption.

Secondly, AI.  Never mind how well it works - it will get better.  But what will happen to our economy?  What will happen to your business?  If you have an AI buying from an AI sales bot, then you have a lower headcount.  But then who are the people buying your products and services if we massively reduce our collective workforces? I don't know, but you should.

Thirdly, Demographics.  People still seem to think that the world is going to explode in population over the next few years.  The reality of a shrinking EU population, a shrinking Korea, a shrinking Chine, a shrinking Japan just is not in people's minds.  Yes the global population is projected to increase by 20/25% from 8 billion to 10 billion.... but there are other scenarios that say actually it go no higher than 8.5 or 9 billion.  Malthus was wrong (thankfully) but these are ideas are not really in the public arena.

fourth, the decline of democracy - authoritarianism and corruption go hand in hand.  And both are on the rise across the globe.  Reversing those trends will be difficult, but without it we are all in a heap of trouble.

Fifth, people still do not realise how important Procurement is, and how important it is to invest in my training courses.

Come on, I can't be all serious!

I am sure that there are lots of things I've missed.  Always interested to hear.

Middle East conflict and Procurement

 

Iran

It is disturbing to see places you know well in the news because of war – in this case Dubai (in particular the airport and Palm).

It helps to bring home that these things are happening to real people not in video game or AI generated content.

I hope this ends soon, and that there are no more casualties.

 

Not by any means the most important thing, but I would like to think about what it means for Procurement.  These days I frequently discuss with my delegates the acronym VUCA – Volatile Uncertain Complex Ambiguous.  Unlike other tools this is just a descriptor rather than a diagnosis, but I think it is useful to help us consider what we might need to do.

In Procurement and Supply Chain we often have to deal with today’s problems, but we do have to try and be ready for future ones.  At the moment the world economy is certainly Volatile.  There is a case that it always is, but I think the past 20 years have been much more volatile than expected in the “End of History” 1990s.  Currently there are many active drivers of political and economic volatility, including both wars and trade wars and the effects of climate change.  Naturally this leads to Uncertainty as it is difficult to know what will happen next – the changing USA tariff situation for example.

The Complexity is something we need to think about.  The obvious impact is likely to be higher fuel prices in the near term, which will lead to higher inflation and therefore reduce the chance for a drop in interest rates.  This may lead to an increased risk of supplier failure.  But this may have some positive impacts, (the Ambiguous element) if the increased risk leads people to continue looking at Resilient rather than Lean supply chains and that leads to more opportunities for local/national/regional businesses.

The Ambiguity is apparent on a global scale – rising oil prices will help Russia to fund their war in Ukraine, but Iran was a key weapons supplier and probably will not be so much in the future.  But China needs oil, and may therefore step in.  Will higher fuel prices support the transition to renewable sources of energy? 

Short term, Procurement needs to move quickly to determine where there are vulnerabilities – and (let’s be clear) opportunities. 

We all think/hope Business As Usual will be around the corner.  But we have been assuming that for 20 years since the Global Financial Crisis. 

Time to get planning.  (and yes I have filled up with fuel today)

Vote, vote, vote!

Not a Procurement related post, and not deliberately political - but there is a General Election on June 8th 2017 and I really do think that we all have an obligation to vote.

Normally people say "I live in a safe seat, so there is no point" or some other idea.  However whichever side wins I bet this election will be portrayed as a referendum on the Brexit Referendum, and therefore the total number of votes cast will be a metric.  Whatever your party, and whether you are Leaver or Remainer, this time (more than usual) all votes will count.

So even if "there is no point" this time there is a point - and the more of the country that votes the more confident we can be that the government reflects the mood of the country.  Or doesn't.  Whichever. 

Deloitte and Prime Minister Theresa May

I spat my coffee out when I read that Deloitte decided not to bid for UK government contracts because PM May was angry with them about a leaked document concerning Brexit.

Note that this was a "voluntary" decision by Deloitte - see Guardian here. There was not official sanction for Deloitte for the link, and is in no way linked to Deloitte's performance on current contracts.  For Deloitte this is a commercial decision to appease a politician in the hopes of currying favour.

This is a very slippery slope.  If the public procurement process can be used by politicians to influence contract award, we are well on the way to corruption and influence peddling.  It may be "accepted practice" for businesses who have upset a minister to "voluntarily" suspend bidding.  This corrupts the fairness, openness and transparency required in public procurement.  If only friends of the government bid we are all losers.

I was pleased to see that Pedro Telles of the excellent www.telles.eu  thinks the same (and said it much earlier than me).  And in the interests of political balance he also points out that Jeremy Corbyn's comments on using Public Procurement to influence the pay structure of suppliers is equally preposterous. and would break the WTO Public Procurement Agreement.

Again, it cannot be said enough: If politicians interfere in the public procurement process we are opening the door to corruption, and the losers will be the public.

This is not the same as saying that Public Procurement cannot be used as an instrument of policy - for example to promotes SMEs and apprenticeships.  But once politicians start saying who can and cannot win contracts we are in banana republic territory.

Bidding for HS2

The Chancellor, George Osborne, has attracted a bit of flak for inviting Chinese companies to bid for contracts for the High Speed 2 rail link from London to Birmingham.  A figure of £12bn has been bandied about, and there are complaints that he is being cynical in talking to potential suppliers before the legislation has passed in Parliament and that he should be promoting these opportunities to British businesses rather than Chinese.

Well, he is a very political beast and so we can assume that this is part of a bigger political plan (which appears to be to build better links to China).  From a procurement point of view it probably makes sense.  This is a very big project.  The Chinese have great expertise, having built far more miles of high speed rail than we have in Britain.  However they may not be aware of a decent project possibly happening on a small island on the other side of the world.  I cannot believe that there are any British (or European) potential bidders who are not aware of the project.

So it makes sense to do a bit of pre-market engagement, and effectively fire the starting gun for the competition.  A competition that will no doubt follow OJEU procedures, which will give an advantage to EU companies used to complying with them.  But it will remind them that there are competitors.  Competitors who now will have time to consider whether they would like to be involved when the time comes.  And whether a Chinese company could actually win.  The Chancellor must hope to convince them that they can... whilst fervently (and powerlessly) hoping that they don't.

Politics, eh?  Give me Procurement anyday.

Tunisia - an act of economic sabotage as well as murder

Another off topic post - it seems to be a week for it.


I had a holiday in Tunisia a couple of years ago.  Two families with young children had a great time in Monastir - down the coast from Sousse where the terrorist attack happened. 


It is shocking to think of such terrible things happening to holiday makers, particularly on a Friday during the Muslim holy month of Ramadan. 


Tunisia is sandwiched between Libya and Algeria, both deeply troubled countries with long term problems - but cushioned (or encouraged) by oil wealth.  Tunisia is small and depends very much on its tourist economy to support its new democracy after years of a money grabbing dictator (and I mean that literally: he is reported to have taken gold bullion with him on his flight to exile in Jeddah).  The attacks were not just on western holidaymakers, but on the Tunisian economy.  The intention is to cut off funds from tourism, impoverishing all Tunisians, and creating a suitable environment for more radicalisation (i.e. poverty).


I wish all the holidaymakers well, but also the vast majority of the Tunisian people who need our support through our visits and foreign exchange.  And there is plenty to see - as well as the Mediterranean, there are wonderful Roman remains (including of the city they built on the legendary Phoenician city of Carthage, and the pictured arena at El Jem).  When you judge it safe, I hope you will go visit.  Maybe even this year.  There are risks everywhere, and Tunisia needs the solidarity of the West, not us turning our backs and leaving them to their fate.


From the procurement point of view - this creates an interesting problem for the travel companies.  They have many holidaymakers who will want to rearrange their holidays, and the travel companies will be keen to do so in order to maintain their income.  But where? Greece has its own problems at the moment.  Turkey being a (safe and beautiful) Muslim country will not appeal to many holidaymakers.   Same applies to Egypt and the lovely Sharm el Sheikh, and to Morrocco (though I prefer the wonders of Marrakech to the beaches).  Will the hotels in Spain be cranking up their prices and looking for a windfall?  Are the travel company buyers in a position to bargain?  Can they extract moderation this year in return for promises for next year?    It will be interesting to see.

Election Day

Not a party political comment, but I hope you vote.  It makes a difference.  This time more than most.

Procurement Risk and Scottish Independence

First of all I should declare that I am genuinely interested in the topic of Scottish independence.  My wife is Scottish, and so is my daughter (though her twin brother is English – don’t ask).  My personal preference is for a continued Union, but we need to recognise that there is a considerable percentage of the population of Scotland that seeks independence.  Regardless of the desirability of independence, it is a possible outcome of the referendum in November 2014, and so businesses should be considering the impact on their businesses.  Procurement and Supply Chain personnel in particular should be drawing up outline contingency plans.

Standard Life has drawn up a contingency plan to move its operations to England in the event of independence, and this has predictably created a political storm.  However it is only sensible to consider the options, whether or not the consequences of that are politically sensitive.

Given that one of the parties in the government is committed to an in/out referendum on membership of the European Union in 2017, some of the same issues will need to be considered ahead of that.  3 years till a referendum, and 5 years or so till a Brexit (as it is called) may seem like a long time, but it should still be a factor in long term supply chain considerations.

What are the issues?  Well, some/all of the following, and probably some more I have missed.

 -     Currency of transactions £/EU/£S – and exchange rates

-      EU membership (Scotland and Britain)

-      Legal basis of contracts (already an issue - are you aware of the differnce between English and Scottish business law?)

-        Formal barriers to trade
-        Soft barriers to trade e.g. Buy Scottish/ Buy English campaigns
-        Interest rates
-        Transport/customs
-        Infrastructure/cost of doing business
-        Personnel/skills movements  - the brain drain vs. immigration
-        Resentment/politics
-        Refocusing of market efforts
-        Decline of “UK national” coverage
-        Time zones
-        Interest rates/cost of living
-        Economic impact
-        National and nationalist politics
-        Procurement legislation (as set by the EU, and applied by different national governments, and as guidedd by the WTO agreement on public procurement 1996, and re-negotiated in 2011)