Appearing in last week’s Financial Times, John Gaunt, the policy and technical director at the Association of Corporate Treasurers, advised business to look after their supply chains when it comes to tightening up on working capital. 

The article quotes him: "If your supplier is suffering liquidity problems because he is losing orders and paying late, you may need to get involved with him to help him survive".  

Remarkably, the ACT urges companies to consider intervening directly with the banks of a less creditworthy supplier to help convince the lender that the supplier can meet sales targets and book receivables by a certain date.

"Particularly if you don't borrow from your supplier's bank it's using your credit standing to reduce your total supply costs," he explains. 

For my money it seems a rather fanciful proposition that, in all but the most critical of supplier relationships, many businesses are going to even consider acting as a guarantor for their suppliers.

Only a week ago Taylor Wimpey announced that it was planning to raise up to £500m to bolster its finances.  

Today the BBC reports that shares in the house builder have halved in value after it failed to secure the extra funding, and the company is looking to its suppliers to help out by cutting prices. 

There’s no shortage of trouble all round in the building sector right now, and it highlights again the dangers when industry begins to believe a bull run can and will continue forever. Another house builder, Barratt Developments, is a prime example of the kind of mad optimism that can prevail in such times. The company has a debt burden of around £1.7bn having bought rival Wilson Bowden last year - when the housing market was at its peak. The combined group’s market value currently sits at £140m. 

The human fallout is that there’ll be thousands of families badly affected through layoffs already announced by Wimpey and others, and the echoes will reverberate through the supply chain too. 

On the flip side, organisations that have continued to pay close attention to their purchasing and supply chain strategies through the good times, should now at least be well placed to take advantage of the market share opportunities that always present themselves in a downturn.

• Promote lower speed limits: Reducing motorway cruising speed from 75mph to 55mph can cut fuel consumption by up to 20%.
• Make sure vehicles are well-serviced: Under-inflated tires can cause fuel consumption to increase by as much as 6%. A poorly tuned engine can use up to 50% more fuel and produces up to 50% more emissions than one that is running properly.
• Introduce sustainable driving practices: Idling vehicles waste fuel, gets you nowhere and produces unnecessary greenhouse gases.

AMR Research’s annual Supply Chain Top 25 has put Apple at the top of the tree, up from number 2 last year and knocking Nokia off the number 1 slot.

The makers of the iPod came out on top by “winning on all fronts”, recording excellent revenue growth, return on assets and inventory turns.

You can hear a podcast summary of the AMR report findings here.

Whilst the credit squeeze has forced many organisations to focus sharply on cost savings in purchasing and procurement, the effects are felt the other way too for many smaller companies as suppliers begin to limit the availability of commercial credit. 

A recent poll of 400 British companies by Graydon UK found that 56% would become more picky about who they offer credit to during the rest of 2008. Martin Williams, Graydon UK's managing director, said a "safety first" culture was now widespread with lenders raising the cut-off point on companies' credit scores. "Suppliers are looking long and hard at those companies who are asking them for credit," he said. "People are asking for better credit scores and so rejecting more companies." 

Businesses that have been trading for less than 20 months were bearing the brunt of tighter credit policies because they are perceived as the most risky, according to Mr Williams. "Some people are simply saying no to new businesses".

CSR, or corporate social responsibility, programmes play a key part in the supplier qualification work we do with our clients, either as part of our consultancy offering or through use of our electronic sourcing tools for the delivery of pre-qualification questionnaires that automatically rank and score supplier repsonses on elements including CSR metrics.

And if suppliers didn't think large organisations really took this stuff seriously, then the last couple of weeks will have disabused them of that notion, with two of the biggest brands on the high street getting into a pickle and causing a stir respectively.

“Even during this time of change for our company, one thing that will never change is our long-standing commitment to conducting business in a responsible and ethical manner,” Starbucks’ chairman, president and CEO, Howard Schultz, said in a letter to stakeholders.

In the same week that he attends the Google Zeitgeist event – the internet giant’s third annual conference for big ideas and blue sky thinking – Gordon Brown is also being warned that Britain is in danger of falling well behind competitor countries and emerging economies because of complacency over levels of business innovation.

Nesta (the National Endowment for Science, Technology and the Arts) published a report yesterday in which it suggests that the UK ‘performs poorly’ in innovation and that ‘there is too much complacency’ in the face of ever stronger competition.

I guess the problem is compounded by a decade of relatively pain-free growth that we have enjoyed, which in many ways detracts from the drive to innovate – a drive that is very much at the heart of the developing world as it rushes headlong to catch and overtake us in some areas, especially manufacturing.

Much as I’m all for the good times, a little of Mervyn King’s pain can sometimes be just the impetus that is required to cause us to look hard again at our businesses and identify where we can do things more effectively and more cleverly – in other words where we can innovate to save.

By the way – try finding any press on the Google event. Or better still try Googling it! Is it just me, or is there something increasingly Kafka-esque about the big co and its plans for world domination?

OK, so I’ve harped on this message before, but whenever I come across releases/news like the one I’ve just read on bobsguide, an excerpt from which features below, I can’t help but shake my head in wonder: 

“A majority of UK businesses are planning to automate supplier invoice processing within their Account Payable (AP) function, according to a new survey from ITESOFT, the leading developer of electronic document capture and automatic invoice processing solutions.”

I can’t tell you the number of businesses we subsequently work with that have implemented invoice processing systems in isolation and find themselves really wishing they hadn’t bothered.

Process automation can deliver huge benefit, but only if you capture the whole process, not the tail end of it.  

For a start, automating invoice capture does nothing to control spend. Sending invoices for approval is after the fact – the goods or services are already bought, the money committed.

Furthermore your approvers know this. The result is they are deluged with invoices to approve and simply do so without so much as a second glance.

A full P2P (purchase-to-pay) platform captures every stage of the lifecycle, from order – validated, authorised and audited before it is committed – to accurate goods receipting and invoicing.

Only by capturing the whole process lifecycle can you realise the benefits and genuinely drive error down, efficiency and savings up.

SAP has finally disclosed the date of its next eSourcing release cycle as Q3 2009, when it intends to deliver better usability (shouldn’t be too hard!), support for complex pricing structures and finally to release dutch auction capability. 

After this, don’t expect any major improvements until well into 2010 – always assuming that SAP sticks to its own roadmap – when a further release will focus on coupling process integration between eSourcing and the overall Business Suite. 

For the next general release, SAP users out there will have to wait until at least 2011 when SAP, with more functional enhancements including the tight integration of SAP PLM and SAP SCM as well as industry specific business processes.  

The big issue for purchasing teams looking to (or saddled with) SAP isn’t really addressed by any of this however. Namely, whether the various SAP modules that compete in this space – such as SAP eSourcing and SAP sourcing within the SRM module – are ever going to be truly integrated and free of overlapping functionality. How SAP eSourcing users (and data) will interact with the sourcing capabilities resident in SAP SRM, especially the complex operational sourcing and bidding capabilities SAP SRM 7.0 remains an unanswered question. 

Could be time to look elsewhere?

Everywhere you turn at the minute, forecasts for the world economy in the next 12-24 months keep on getting progressively worse.

And while there is always a danger of the world simply talking itself into recession, what can’t be denied is that the effect of a downturn, perceived or otherwise, is significantly compounded by rapidly rising commodity prices.

The Times today reports that petrol prices are expected to reach more than £1.12 per litre next month as service stations feel the effects of the latest surge in global crude prices – in truth it’s a price point I’ve already experienced on the high road.

Manufacturers, particularly in the USA, are talking of a ‘perfect storm’ where the credit markets, tax calls, oil and raw material prices have all hit costs at one end of the business and driven down consumer spending power at the other end.

As a result we have already seen organisations focusing even more closely on procurement practices and the supply chain, as cost reduction becomes a seriously pressing issue across all direct and indirect spend categories.

There has been a noticeable upswing in what are effectively hedging events, with businesses running electronic sourcing events – typically eAuctions – with a view not necessarily to make big short-term savings, but to secure a price point for the kind of goods and services most affected by commodity price rises.

Recent examples include carrier bags and courier services, both highly sensitive to fluctuations in oil prices, as well as events that run straight to the heart of the matter to secure a price for the supply of millions of litres of diesel.

The key win here (on top of the real savings that were realised in every case) is a period of certainty in uncertain times. And that’s simply priceless.