Today Procurement Leaders reported that some of the UK’s largest companies were set to sting their suppliers by announcing extended payment terms.

The plans - another unwelcome by-product of the credit crunch - are another indication that cash is fast becoming king and appears to represent a hammer blow to suppliers that are already feeling the pinch.

The little guy, however, doesn’t appear to be taking the news lying down, as Alliance Boots has found to its cost.

Last year, the chemist chain wrote to suppliers telling them that invoices would be paid up to 75 days from the end of the invoice month – a dramatic increase on the previous, somewhat more reasonable, timescale of 30 days.

The company also announced plans to charge a 2.5 per cent “settlement fee” – effectively a charge for paying the bill, whilst claiming that its procurement strategies were “in line with other groups of similar size and scale.”

The Federation of Small Businesses (FSB) claimed that the company’s new policy, in reality, extended payment terms to 105 days, and have prompted one supplier to take action.

"Making small businesses wait 105 days for payment and charging them for the privilege of doing so is nothing short of outrageous," the FSB said, and training business MTa International appears to agree.

The company, which unlike the corporate giant it’s taking on has just two employees, has threatened to withdraw its services unless Alliance Boots re-thinks its policy, which last week it did.

But whilst MTa celebrate other suppliers are still facing up to a stark, and rather unpleasant reality - the big boys, meanwhile, appear intent on sticking the boot in.    

It’s not often you’ll find the ‘s’ word on these pages, but a recent blog over on Modern Materials Handling caught my eye after successfully pulling off the unlikely feat of including ‘sex’ and ‘green supply chain’ in the same sentence.

Using a line from John Clark, the marketing manager for Dematic, Bob Trebilcock told readers that “the green supply chain is a lot like high school sex……….everyone is talking about it, but not a lot of companies are doing it.”

Materials Handling claims that they’re still seeing precious little evidence of green initiatives graduating from the boardroom to the metaphorical shop floor, and Clark’s conclusion (once the schoolboy guffawing at the back has finished) will strike a chord with many CPO’s who are being asked to implement sustainable procurement practices without the required resources, guidance and financial support. Problems that often leave them fumbling in the dark.

For those companies relying on China for their sourcing needs it’s crunch time. This week factories around Beijing are downing tools to help the Chinese capital hit its pollution targets as the countdown to the 2008 Olympics enters its final stage.
 
From July 20 the Chinese government will enforce construction sites, mines and chemical plants around Beijing to stop churning out CO2 until the self-styled greatest show on earth finally leaves town in mid-September.
 
Polluting factories around the capital will be put under pressure to cut emissions by as much as 30%, while more than 300 factories in the cities of Tianjin and Tangshan will also cease production for the next eight weeks.
 
The news may be welcome for the long-suffering residents of a city where pollution is a daily hazard but for already stretched supply chains the shut-down is about as desirable as a visit from the taxman.
 
China has invested $17bn is an attempt to clean up its environmental act before the world’s media descends on the country – although whether this short-term solution is any solution at all is a moot point. Fighting pollution is, after all, a marathon and not a sprint.

Interesting article in The Economist today focusing on what the newspaper calls "the high priest of 'peak oil'". If you haven't heard of the high priest, Matthew Simmons is an investment banker that put his head above the parapet and declared that oil production had peaked way back in 2003 when you could still get change from a quid for a litre of petrol.

Simmons' credibility comes from the fact that he's an oil man himself - he founded an investment bank which has so far handled more than 500 M&A deals in the sector. And he spent a huge amount of time researching his book Twilight in the Desert: the coming Saudi oil shock and the world economy which took a rather more cynical view of then-popular theories about Saudi production capabilities.

So, what's keeping Simmons busy now? Farming, apparently. He aims to establish a farm in case the supply chains that provide the US with its food break down due to a lack of oil. He also says that globalisation must stop and that as much trade as possible should be conducted by sea.

Nothing new there, you might think. But when the oil men start growing their own vegetables you know that something must be wrong...

The UK's Farnborough airshow has traditionally offered a platform for some of the aviation industry’s biggest hitters to flaunt their wares and generally show-off for a week in front of the world’s media. This year, however, there promises to be a slightly more downbeat feel to an event that has acted as a magnet for the great and the good since it was first held in 1948.
 
And from a procurement standpoint the biannual show promises to make for fascinating viewing over the next seven days. No industry has been hit harder by the "perfect storm" of global economic conditions, and the 140,000 or so aerospace and defence professionals descending on the South of England this week will have one word on the tip of their tongue.
 
The soaring cost of fuel is hitting every business hard, but airlines are feeling the pinch more than most, and on a day when Airbus said that rising fuel prices were actually boosting its order books – “we have the most energy efficient aeroplane in the world – the aeroplane of the future,” according to EDS CEO Louis Gallois – those involved in aviation procurement will undoubtedly be on the lookout for potential avenues for further cost savings from green innovations.
 
The potential of securing package deals that include both the servicing and repairing of aircraft is another area which companies will increasingly be looking towards procurement to secure, and is likely to be another key emerging trend as firms look to gain greater control of their spend.
 
One thing that does seem certain is that the news coverage this week is far more likely to centre on procurement issues rather than headline-grabbing orders – the perfect storm has already taken care of that.
 

Perhaps this is what it's like to be a real CPO - arriving in a strange foreign city with only a Blackberry and laptop for company...

The City is a drisly Luxembourg, where we have endured a nerve-shattering flight on a Fokker 50 out of London City Airport to come and look around Vodafone's new central procurement hub. Our host for the day is its chief executive, and Vodafone's global supply chain management director, Detlef Shultz.

So far, so good. If it wasn't for the so-called "mild" turbulence during the flight and the gentleman in front who almost broke my legs when slamming back his seat, the flight would have been bearable. Still, small price to pay for Vodafone procurement executives who recognise the efficiencies and benefits of housing its entire procurement operation under one geographically central roof.

I look forward to hearing more about it and filling you all in on what it takes to establish a procurement hub for a company the size of Vodafone.

A recent blog over at the The New York Times reminded me of a recent interview I did with Rob Hemsley, European director of procurement at Heinz. The blog reports on the story of how House of Representative Democrat member, Diana DeGette, sees understanding supply chains as the key to food traceability.

A recent outbreak of salmonella in the US, which has left nearly 1,000 ill and, according to some reports, the death of a cancer patient, illustrates the importance of the issue.

While the US Food and Drug Administration and Center for Disease Control and Prevention are busily trying to get to the bottom of the outbreak, precise understanding of supply chains would soon get to the root of the problem according to DeGette.

It's an issue that isn't lost on Heinz - according to Hemsley, any single Heinz tomato can be traced back to the exact field in which it was grown...

(By the way, the full interview with Hemsley will be published in the next issue of Procurement Leaders magazine. In the meantime, a video teaser of the interview will be available for viewing in the next few days.)

Arthur D Little, allegedly the oldest management consultancy in the world, or so it keeps telling us, has put much of its collective wisdom generated over 120 years of consulting into an interesting article on sustainable procurement.

You can find the article in the China Daily, and it's worth passing around the team (perhaps you shouldn't print it out, however...)

The article, among other things, investigates the difference between proactive and reactice buyers and the impact it has on overall business risk.

You know that procurement is making waves when the sales guys start getting worried. And that’s just what’s happening over on Pipeline; a blog written by sales consultancy, Renbor.

“Let’s face it procurement or purchasing specialists, not people sales professionals want to deal with,” blog author Tibor Shanto writes. “There is no minimising the impact they have on sales and the success of sales professionals.”

Of that, there is no doubt, but Shanto has a lot to learn when it comes to getting the best out of procurement. “Trying to sell to them using conventional means is analogous to one trying to inflict pain to an inanimate object like say a stump, or someone with no nerves in their body,” he rants. “Since they are immune to value, your value prop will fall on deaf ears.”

Essentially, he claims that the best solution is to circumvent procurement entirely and find a more suitable person within the company who could then sell the product to procurement on their behalf.

Rather a complicated process, one can’t help think. Perhaps if sales professionals worked with procurement professionals on how their products or services can help both organisations grow, rather than trying to sell them something, they’d have a little more luck.

Companies are raising prices at some of the fastest rates on record, and the services sector is shrinking quicker than at any time since October 2001 – just two of the findings of the latest PMI survey and a couple of very good reasons to believe that the UK, like the US, is slipping into recession.

Most interestingly, the Chartered Institute of Purchasing and Supply(CIPS)/Markit survey suggests that input prices are soaring at breakneck speed – with June’s reading of 71.7 up markedly on the 67.7 figure recorded in May.

In response companies are aggressively raising their prices – leaving the prices charged index standing at 56.0 in June, up from 55.8 in May. But already the third highest reading in the survey’s 12 year history looks set to go up, rather than down, as economic conditions worsen.

These findings are likely to place already over-stretched procurement organisations in an even more awkward position in the second half of the year, as companies look to remain competitive by keeping costs down - despite almost unprecedented external price pressures.

Activity in the service sector offers little respite, with the survey showing activity falling faster than even the most downbeat of analysts had expected. Activity hit a low of 47.1 in June, down from 49.8 in May, and with the magic 50 figure (which provides the cut-off point between expansion and contraction) looking ever further away it’s little wonder that the ‘r’ word is starting to cast an increasingly long shadow across the City of London and beyond.

"The services report confirms the broad-based deterioration in UK economic activity, with the composite PMI heading towards unprecedented (for the UK PMI surveys) recession territory," said Paul Smith, senior economist at Markit Economics.

"The issues facing the service sector are rooted in the dual shocks of both the financial crisis and -- of rapidly increasing concern to service providers -- surging global oil prices."

With neither showing any sign of letting-up it appears that things could get worse (perhaps a lot worse) before they get better.