As you know by now, European President Jean-Claude Juncker had a meeting with British Prime Minister Theresa May last Friday morning to agree a historic deal defining the terms of Britain’s divorce from the EU. If all that was agreed on December 8th comes to pass, the UK has essentially committed to a soft Brexit.
Ireland has done well in Phase 1 of the Brexit negotiations, including preserving the Common Trade Area, protecting the Good Friday Agreement and, crucially, obtaining a guarantee that there will be no hard border. It is now for the European Council to decide today if sufficient progress has been made to allow the negotiations to proceed to Phase 2, which is a significant step forward in the process leading towards UK withdrawal from the EU in March 2019. It is expected that a transition period would last two years ensuring Britain will remain part of the customs union and single market (including being subject to EU law) until 2021.
Thereafter, the risks and unknowns for your business need to be carefully considered. Most proactive businesses have started to document Brexit assumptions within their Brexit action plans, supporting their planning and strategy work. Whether importing directly or indirectly from the UK, the impacts to your operating model, supplier base, cost base and working capital requirements needs to de analysed, to understand where the areas of greatest risk are (so as to develop suitable mitigating actions to reduce the impact of Brexit on your business).
Specifically focusing on your supply-base and imports, can you answer the following 5 questions to identify risks and resilience steps for your business?
- What suppliers will impact the business most if they cannot supply you tomorrow?
- Do you know what % of your goods and services are coming directly or indirectly from the UK?
- Have you researched alternative non-UK suppliers?
- Are there contracts, licenses or regulations restricting your global sourcing strategies?
- Are you aware of the potential additional costs to import from Europe in terms of hubbing, logistics partners, Minimum Order Quantities plus the impact on cash flow?
As Arvo have been participating in Enterprise Ireland’s Brexit Roadshows recently, let us know today how we can help build resilience into your supply chain for Brexit (& other Political, Economic & Technological events that may cause risks for your business in future).
Have your Logistics costs reduced in 2017? Are fuel surcharges reappearing or are you expecting a price increase from your transport provider? It is a fact that diesel prices have increased severely in recent weeks but this 5% increase should not significantly impact your logistics costs as fuel constitutes only 17-32% of your supplier’s total annual vehicle operating costs*.
Does your business depend on the efficient and effective delivery of parcels, boxes, pallets or containers to your clients? If so, have you benchmarked the non-price aspects of the service e.g. quality, innovation and reporting capabilities?
If you are interested in reducing transport costs or increasing quality services, talk to us today, as there are daily changes in the transport sector which will benefit your business in 2018 e.g;
- Automation: Globally, automation is well-established in many distribution centres and is becoming more prevalent in Ireland now too, with a range of robotic solutions offering the ability to introduce automation into DC operations without the need for major structural alterations.
- Labor Costs: Have been increasing due to a severe shortage in drivers and rate pressures on ground-staff in most logistics operations. While OPEC play monopoly with global oil supply and prices, a real concern for the transport industry is the impending labor cost increases (while thankfully, Insurance cost increases borne by all over the past few years are not expected to continue).
- Consolidation: There have been a raft of mergers, acquisitions and alliances within the global freight industry over the past 5 years, which are turning traditional supply chains upside-down. The increased competition and coopetition is triggering supply efficiencies and price wars, which is flooring global freight rates (and we hope it is sustainable)
- Technology: There are very few industries immune to the technical breakthroughs of the last 5 years, while the transport industry is no different with ground-breaking advances expected to continue via drones, autonomous vehicles, Blockchain, IoT solutions, automation (as above) etc, with customers benefiting from increased efficiencies, reduced risk, improved governance, transparency and service etc.
- Customers: The aforementioned technical advances are fuelling customers expectations and demands, where same day deliveries are being explored by many retailers. Argos are leading this campaign, with their 2017 Christmas advertising highlighting online orders delivered in as little as four hours through its nationwide Fast Track same-day delivery service.
So will a single trend above or a combination of all impact your supplier and customer deliveries in 2018?
As Arvo have managed Logistics Reviews recently with clients benefiting from commercial savings in the region of 25% – are you interested in such reductions for your business? Contact us today to discuss further.
*FTA’s ‘fuel fractions’ table shows fuel costs as a proportion of total annual vehicle operating costs
10 Group Buying Challenges
Group Buying is not a new concept even though it has become very popular in internet shopping since the Global Recession of 2008. Groupon & Living Social etc. have popularised this age-old volume leverage technique, but traditional buying groups have existed for decades, helping cooperatives and buying clubs pool their buying requirements to leverage better deals. Purchasing consortia have established themselves as a vital link in today’s world-class supply chain strategies, used as a powerful tool to significantly reduce costs in the most effectively run procurement organisations (not just for SME’s which is a common misconception).
Cooperative commerce facilitating Group Purchasing Organisations (GPOs), has in-fact been around for a hundred years, with the first healthcare GPO established in America in 1910. While the modus operandi has not changed since, with buyers empowered to aggregate their purchasing power and obtain lower prices than they otherwise would be able to get individually.
So the business case for buyers is obvious, with the opportunity to reduce commodity costs directly by 10-20% plus the reduction in time spent sourcing, negotiating and administering individual product/service deals. Suppliers also benefit with the opportunity to reduce their Cost of Sale (& possibly Logistics Costs), while they increase turnover and market share. Manufacturers can often offload excess inventories, while certain suppliers use collective purchasing groups to launch new products on the market (again availing of low customer acquisition costs).
However, the diminishing success of Groupon has highlighted one of the age-old flaws with Group Buying – greed! The value for buyers and suppliers needs to be sustainable, while there should be limited hassle or “friction” for buyers and suppliers to engage in group buying activities.
10 Group Buying Challenges;
- Administration – as hinted above, joining a GPO can be difficult gathering all company, financial and spend data. However, without the data, the opportunity is impossible to define
- Consolidation – as varying product and service data is amalgamated, difficulties arise when negotiating with the buyers to consolidate their specifications and go to market with a limited product/service range
- Quality – as prices decrease, there is a perception that the quality of product/service may diminish also
- Autonomy – buyers like to make decisions and joining a buying group may limit their autonomy in the marketplace thereafter
- Commitment – closing the Intention-Action Gap is a constant task for most GPO’s
, ensuring buyers and suppliers actions align with their initial intentions
- Credit Risk – suppliers can struggle with the creditworthiness of buying groups, with the one-to-many relationship leading to a price premium within certain purchasing alliances
- Margin – suppliers need to gain market share at an affordable margin reduction. Similar to greed below, the commercial terms of each GPO need to be sustainable for all parties
- Greed – is the business model viable for the buyer, supplier and GPO?
- Privacy – with multitudes of commercial data being shared within co-ops, between third-parties etc, data privacy is an utmost concern to all stakeholders
- Trust – Trust is the glue that holds all business relationships together, and new GPO’s or members to a group (including new suppliers), suffer with a lack of trust initially
So what other Group Buying Challenges have you met?
With years of experience managing group buying activities via email, spreadsheets & Aspirin!, Arvo have initiated research with Procurement Insights business iDDea and our academic partner UCC, to resolve the above challenges. We are targeting the trust, transparent, bureaucratic and greed flaws of existing buying groups and hope you can join us on this journey…
Origin Green is Ireland’s food and drink sustainability programme with a vision that Irish food and drink becomes the first choice globally because it is sustainably produced by people who care. It helps Ireland produce more food from less resources and makes great business sense.
With climbing energy costs, increased carbon regulation and social responsibility, plus frequent price hikes in global commodities, the demand for sustainable food and beverage producers worldwide has never been higher. International trade customers are actively seeking to align with a sustainable food and beverage supply chain, and Origin Green supports that common goal of sustainable food production.
Are you interested in applying for Origin Green membership?
Have you time to write the 50-60 page application?
Have you the resources to create a 10,000 word proposal?
Do you want professional writing assistance to ‘get this over the line’?
If so, Arvo can help. We are expert Tender writers and have supported local food businesses with their Origin Green applications. Writing great proposals is a critical skill for all food businesses to document your current ways of working and gain support for your future plans. Your ideas or suggestions are more likely to be approved if you can communicate them in a clear, concise, engaging manner. Knowing how to write a persuasive, captivating proposal is essential for success within Origin Green, so contact Arvo today to discuss your Origin Green plans or get started with the Origin Green form online here.
It is important to note that Origin Green works in a different way for farmers and food businesses. For farmers, participation in Bord Bia’s Sustainable Assurance Schemes ensures membership of the programme. Quality Assurance plays a fundamental role in promoting food and horticulture and provides the platform for consumer promotion of product quality. Bord Bia operates a series of quality assurance schemes for the food industry. The schemes are built on best practice in farming and processing, current legislation, relevant industry guidelines and international standards – and are accredited to the ISO17065/2012, outlined as follows;
- Sustainable Beef and Lamb Assurance Scheme (SBLAS)
- Meat Processor Quality Assurance Scheme (MPQAS)
- Feed Quality Assurance Scheme (FQAS)
- Sustainable Horticulture Assurance Scheme (SHAS)
- Pigmeat Quality Assurance Scheme (PQAS)
- Poultry Products Quality Assurance Scheme (PPQAS)
- Sustainable Dairy Assurance Scheme (SDAS)
- Sustainable Egg Assurance Scheme (SEAS)
Similarly, please contact Arvo to discuss how we can help your Quality Assurance Scheme application.