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Report: "The New Age of Procurement and Supply"

BritCham / CBBC
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On 4 November, the British Centre hosted a thought-provoking presentation and discussion on “The New Age of Procurement and Supply”, given by David Noble, Group CEO of the Chartered Institute of Purchasing and Supply (CIPS). 
 
This industry is currently undergoing profound changes, largely owing to globalisation, and CIPS is calling for regulation and standardisation to be stepped up worldwide, with a particular eye on ethics, transparency and fraud.
 
The presentation introduced several focal points on the “global agenda” for procurement and supply professionals:
  • The worldwide recession
  • The scramble for raw materials
  • Environmental and social responsibility
  • Technological progress (e.g. 3D printing)
  • Changes in the environment (geopolitical and macroeconomic)
  • Demographic change
  • The eastward shift in the economic centre of gravity
It was pointed out that inventory levels have reached an all-time low and companies have stockpiled cash to the tune of an estimated $3 trillion. Enterprises find themselves having to redefine the boundaries of their roles in areas such as supply and financing, mergers and acquisitions, and post-contract management.
 
But there are new figures that shed some light on the scope of the profession, which had previously been difficult to determine. Estimates suggest that there are over 2.5 million people employed in this profession among G20 and OECD countries alone, of which some 440,000 are in the EU and 335,000 in China – so thinking about how to regulate and standardise the industry is something of a colossal task.
 
Two key problems were identified: fraud and ethics (e.g. slavery, work-related accidents and integrity in food supply chains). With regard to ethics and transparency, Mr Noble highlighted the difficulty of controlling what happens several links down a company’s supply chain, especially where this involves countries that may have questionable practices and little or no regulation.
 
As for fraud, it is said that corruption adds 10 per cent to the cost of doing business and 25 per cent to the price of public procurement in developing countries. This is an area of concern for CEOs, and there is a general consensus that change is required. Action is being taken in some quarters: for example, Andrew Forrest, chairman of Fortescue Metals Group, founded a charity called the Walk Free Foundation, which promotes ethical trading. 
 
CIPS has released a Policy Statement on licensing the profession, a move which would protect not only the corporate environment, but also individual workers. For instance, in the event that a worker was asked by a manager to do something unethical, if there were a licensing body then at least he or she would have some recourse and grounds for refusing. One of the qualifications offered by CIPS is an online ethics test, which can be done annually as a means of ensuring accountability.
 
Mr Noble’s presentation was followed by a Q&A session and a debate. The point was raised that there are large discrepancies in professional standards between different parts of the world. Asia is seen to be up and coming, although inevitably the procurement and supply industry in China has its own peculiar characteristics.
 
Attendees tended to agree that a top-down approach – i.e. enlisting the support of the government – is the way to bring the industry here into line with international standards (though Mr Noble pointed out that it is possible for countries to abide by their own national standards within the international framework). There are currently 40,000 students working towards CIPS qualifications in China, which is a good start, but persuading any government to bring in new red tape, even in the UK, is an uphill struggle – so companies must self-regulate. 
 
Publicity is also crucial, perhaps especially in China, to raise awareness of bad practice in the industry. Local companies seeking to go global are unlikely to survive if they are found to operate unethically and are exposed as such, so a kind of “peer pressure” within the industry may also be helpful. It is worth convincing companies and government that trading ethically will reap financial rewards in the long run, and the first step in China’s case should be transparency.
 
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