Everyone loves a good myth but, when it’s perpetuated by the media, it doesn’t take long for fact and fiction to become intertwined - which is why Darryl Conley’s recent presentation to delegates at Global Sourcing Live event offered a breath of fresh air.

Using evidence compiled by the Everest Group, Conley set about debunking some of the myths surrounding offshoring that had built up an almost unstoppable momentum over the past 12 months.

Firstly he reported that, despite recent headlines, labour arbitrage would still deliver significant cost benefits for at least the next ten years.

Secondly, Conley attacked exaggerated media coverage of decisions by the likes of Lloyds TSB, Philips and Aviva to bring offshore operations back home, claiming that it offered a “distorted” version of offshoring’s true picture.

He then set about dismantling the claim that only low value work was being offshored. “There is a fair degree of activity right across the value added stack,” he said, before using the example of knowledge process outsourcing as an area of potentially huge growth to further hammer home his point.

All well and good, but what about the bottom line? Everest’s research showed that 70 per cent of buyers were achieving savings of between 30 and 50 per cent. A further two-thirds of respondents also reported improvements in productivity (although on the flip side just 50 per cent noted any enhancement in quality).

Finally, tackling the myth that offshoring is only about India, he told delegates that the growth of areas such as Canada, the Philippines and Mexico (helped by their proximity to the US) meant that these countries were now posing a genuine threat to South Asia’s traditional dominance.

As a piece of myth-busting it was hard to beat.

Like George Clooney and his fellow doomed ship-mates in A Perfect Storm, Eos Airlines appears to be the best example of what can happen when extreme conditions combine to make survival impossible.

The start-up – named after a Greek goddess - appeared to have everything going for it when it started trading in 2005. Times were good, and Eos was offering executives a premium service (with a price to match) for those companies willing to stump up the cash to fly their people across the Atlantic.
 
Now, following hard on the heals of Maxjet, who crashed and burned in December, Eos has filed for bankruptcy. Citing rising fuel costs, the credit crunch (which made it nigh on impossible for the company to refinance their debt) and a reluctance of companies to embrace their business model in turbulent times, Eos has admitted defeat.

Its demise leaves Silverjet and L’Avion – who fly from Paris to New York - as the last remaining companies specialising in business class flights. However, given that Silverjet’s share price has fallen to 14p from a high of £2.09, and reports suggest that it’s French rival is also struggling, it seems unlikely that either will be in it for the long haul.

First Wal-Mart announces they are to restrict rice sales to its customers in the US, then Starbucks’ shares plummet on the back of huge hikes in the price of coffee and the reluctance of US consumers to stump up cash for lattes in the midst of worsening economic conditions across the pond.

It would have been hard to imagine either of these occurrences just 12 months ago but, courtesy of ongoing global instability, neither story caused anything more seismic than a momentary lifting of eyebrows.

“Era of cheap food ends as prices surge”, The Times headlined screamed yesterday as - alongside the revelation that a cheese sandwich now cost 33 per cent more than during the equivalent period last year – it listed the acute shortages that are causing mayhem across the world.

Rice, wheat and vegetable oil are all in short supply, sending prices soaring and leading to food riots in countries such as Bangladesh and Egypt. With this unrest likely to spread, it’s far from inconceivable that trouble in the sourcing hotspots of India, China and Vietnam will follow – with potentially devastating effects for procurement.

Sourcing always throws up some interesting challenges, but Burger King’s product development and innovation department is currently embarking a mission that tops most.

According to a story on BrandRepublic, Burger King’s sourcing team is on the look out for ingredients to put in the UK’s most expensive burger – a take-away could set you back £85.

The idea is nothing new, after all Selfridges was scouring the world for ingredients to include in a similarly priced sandwich not so long ago, but that doesn’t make the job any easier - after all, where’s the best place to source wagyu beef from?

Then again, if food prices keep rising, maybe it won’t be too long before £85 burgers become the norm.

It’s unclear as to how procurement jobs will be directly affected by the global credit crunch but whilst JP Morgan has predicted as many as 40,000 jobs could be shed in London alone, those willing to up sticks and seek their riches elsewhere could be handsomely rewarded.

It’s safe to say that the jobs market in the US and Europe has enjoyed better times (although jobless figures on this side of the Atlantic still give little indication of the slowdown biting), but as long as Asia and other emerging economies, in particular the Middle-East and Russia, continue to expand at their current rate, jobs will, it seems, be there for those willing to look outside their own borders.

Procurement expertise is highly sought after across the globe – and one country’s loss could certainly be another one’s gain.

The credit crunch has dominated the headlines throughout 2008 but for procurement a crunch of another kind could be just around the corner.

A recent survey by consultancy firm, the Everest Group, has found that a ‘talent crunch’ in India’s seven major outsourcing locations – Bangalore, NCR, Mumbai, Pune, Chennai, Hyderabad and Kolkata – is forcing a rethink in the BPO industry.

And as the talent pool in these cities shrinks (at the same rate that costs increase), it seems that more and more firms will be moving out to the business equivalent of the suburbs.

"It is difficult to sustain the growth in Tier I cities because of the rising real estate prices and talent crunch. There is no option but to move to Tier II cities," Everest Group's Country Head (India) Gaurav Gupta said.

 "Movement to lower-cost cities within India is likely to result in additional 15-30 per cent reduction in operating cost despite lower employability and higher management costs," Head of Global Services at Everest Research Institute, Nikhil Rajpal, said.

The shift away from India’s traditional BPO hubs towards places such as Jaipur, appears inevitable, and these new ‘low cost cities’, could do much to alleviate the increasing issue of talent shortages.

How long it will take them to get up to speed remains to be seen but, if you were thinking of investing in a map, now might be a good time to get one.

Over on his Spend Matters blog Jason Busch has reported on a fascinating story that could have a significant impact not just on the ever-increasing price of raw materials, but also on those sourcing operations leaning heavily on Chinese suppliers.

According to both the International Herald Tribune and the New York Post, China is to drastically reduce both its manufacturing and construction levels in the run-up to the Olympics, as the Chinese authorities look to alleviate the chronic pollution problems that are threatening (amongst an ever-increasing list of other factors) to derail the games.

The city of Tianjin; the provinces of Hebei, Shanxi and Shandong; and the Inner Mongolia region, are also expected to be effected, in a move that may do much to help marathon runners around Beijing’s smog-ridden streets, but is unlikely to do much for the thousands of companies relying on China for their supply-base.

On his All Roads blog, Richard Brubaker, founder and managing director of China Strategic Development Partners, also warns that if this principle measure is unsuccessful the Chinese government could introduce more sweeping measures.

“…if pollution levels do not improve, a wider net will be cast than is currently being announced.”

Of course, as Spend Matters quite rightly points out, the closures from the most raw material hungry nation on earth may have a positive impact on pricing, but this will be scant consolation for those companies looking to ensure supply continuity.

Last week we reported the findings of a survey from the British Chambers of Commerce which showed that price pressures in the UK were running at their highest level for a decade.

Now, official figures have illustrated just how tough things are getting for procurement at a time when the need to achieve demonstrable cost savings is more pressing than ever.

According to the Office for National Statistics (ONS) manufacturers’ costs rose by a record 20.4 per cent in March, while factory gate prices also got in on the act – finishing the month at a 17-year high.

The reasons for this spike are well-documented and fall largely at the door of spiralling fuel costs, which last week hit a fresh high (yes another) of $112.21 a barrel.

The news will be hardly be welcomed to those in procurement (although the confirmation of what is blindingly obvious will hardly come as a surprise), but it’s unlikely that the governor of the Bank of England will be raising a glass to the figures either.

After all, the Bank’s Monetary Policy Committee bowed to public (and private) pressure last week to cut interest rates in the UK by a further quarter of one per cent, as businesses, and a government that appears to going the same way as the Titanic, looked desperately for an immediate solution to what is, quite clearly, a long-term problem.

"Ongoing elevated producer price inflation in March highlights the fact that the Bank of England cannot afford to relax on the inflation front and suggests that the Bank continues to have limited scope to cut interest rates — for now, at least,” Howard Archer, chief UK & European economist at Global Insight, said after last week’s decision.

Tougher ones lie ahead.

We here at Procurement Leaders like to think we're not backwards in coming forward when it comes to embracing the power of the Internet – as anyone who has witnessed our recent rebrand will testify.

It would take a brave man to deny that the World Wide Web has transformed modern-day business, so you can imagine the excitement around these parts when talk of ‘the grid’ replacing the Internet, surfaced earlier this week.

The ‘grid’ is nothing new – a cursory google search reveals that a press release trumpeting it’s future was circulated in 2002, but recent developments in Switzerland have caused understandable ripples from Geneva to the Galapagos Islands.

Scientists in Switzerland claim the new ‘grid’ is 10,000 (yes, that’s ten thousand) times quicker than your average broadband connection.

The pioneer of the system, hardly surprisingly, is Cern – the particle physics centre that created the Internet – and it claims that grid will soon offer lighting fast capability for tasks such as high-definition video telephony (all for the price of a local call), and the downloading and sending of sophisticated images. All performed in the blink of an eye, and certainly before you can say ‘procurement leaders’.

David Britton, professor of physics at Glasgow University and a leading figure in the grid project, believes grid technology will not just revolutionise the way businesses do business but could also change society.

“With this kind of computing power, future generations will have the ability to collaborate and communicate in ways older people like me cannot even imagine,” he said.

Now that, as they say, is progress.

The EU has not been shy at trumpeting its plans to drastically reduce carbon emissions across Europe. One leading figure, however, remains distinctly unimpressed.

Nigel Lawson, who was the Chancellor of the Exchequer between 1983 and 1989, is one of a growing number of sceptics who believes that the headlong rush to a low carbon economy is likely to cause irreparable harm to businesses across Europe, and this week he’s publishing his feelings on the subject.

An Appeal to Reason: A Cool Look at Global Warming, is unlikely to find its way onto Al Gore’s birthday wish list, but Lord Lawson clearly believes that he has something worthwhile to say and won’t wait any longer to say it.

“Over the past five years I have become increasingly concerned at the scaremongering of the climate alarmists, which has led the governments of Europe to commit themselves to a drastic reduction in carbon emissions, regardless of the economic cost of doing so,” he tells readers – painting a picture almost as cataclysmic as the one so eloquently punted by those who believe that the world is on the verge of the climatic equivalent of a mental breakdown.

Lord Lawson, who was never renowned for his sentimentality whilst in office next door to Mrs Thatcher, goes on to say that although man has undoubtedly played a part in the temperature rises seen in the recent past, the full reasons behind global warming remain unclear.

He gives short shrift to the Intergovernmental Panel on Climate Change, labelling their estimates “grossly inflated”, and even claiming that the benefits of warming could balance the costs.

His major fear though, is that the recent moves by the European Union, including the possible implementation of trade barriers against those who go against their emission cuts plans, will do far more damage than climate change ever could.

“A lurch into protectionism, and the rolling back of globalisation, would do far more damage to the world economy in general and to the developing nations in particular than could conceivably result from the projected resumption of global warming,” he warns.

According to Lord Lawson, the book itself is “short” – the debate will run well after the final page has been turned.