We have been so focused on Tim Cook (and his move from CPO to CEO) that we somehow skipped September’s edition of “CPO News.” To catch up, October gets a special second edition of CPO News. Reminder to please email us at info (at) cporising dotcom with any news items you believe are worth reporting.
China – Japan Political Tensions to Impact Trade
Violent protests and calls for boycotts of Japanese products broke out across China in mid-September after Japan bought two of the East China Sea islands, known as the Diaoyu in Chinese and the Senkaku in Japanese, from their private owners. China’s government was infuriated by the move, branding it as an affront to Chinese sovereignty and an act of provocation on the part of the Japanese. The Chinese protests targeted Japanese cars and shops and forced many businesses with ties to Japan to shut down.
Already, Mazda Motor Corp has reported that its China sales tumbled 35 percent in September from a year earlier while Nissan Motor Co and Toyota Motor Corp were forced to slow production after arsonists damaged their dealerships in Qingdao. Airlines have also suffered, with All Nippon Airways Co Ltd reporting that 40,000 seat-reservations were cancelled for flights between Japan and China between September and November.
Senior executives at China firms with business ties to Japan foresee tensions extending well past October with almost 50% expecting a negative impact on their business this year. Many experts expect this tension to have a negative impact on Japanese trade until the issue is resolved.
Our view: This issue has created a short-term opportunity to source excess capacity from those Japanese suppliers with heavy customer ties to Chin. If the situation continues to escalate, a longer-term buying opportunity may exist, so Chief Procurement Officers would be wise to start following this issue and investigating Japanese suppliers.
Coca-Cola’s CPO Announces New Supply Partnership
Coca-Cola Company reecently announced a partnership with JBF Industries Ltd. to further expand production of the plant-based material used in the Company’s PlantBottle™ packaging. The supply partnership will help Coca-Cola continue its leadership in bringing renewable, lower-carbon plastics to the marketplace and move the Company closer to its target of using PlantBottle™ packaging technology in all of its plastic bottles by 2020.
Ron Lewis, Chief Procurement Officer at The Coca-Cola Company said, “The benefits of sustainable innovation are only fully realized when commercialized and put in the hands of consumers. In 2009, we introduced the world to our PlantBottle ™ package – the first recyclable PET plastic bottle made partially from plants. Today, Coca-Cola has sold more than 10 billion PlantBottle™ packages around the world that are less dependent on petroleum and have a lower carbon impact. We are pleased that our partnership with JBF Industries Ltd. will help us further expand global production.”
JBF Industries will spend the next two years building what will be the world’s largest facility to produce bio-glycol (the primary ingredient in PlantBottle™ packaging) in Sao Paulo, Brazil. The production will use locally-sourced sugarcane and sugarcane processing waste which meet Coca-Cola’s sustainability criteria that it uses to identify plant-based ingredients for PlantBottle™ packaging.
All Aboard? U.K.’s Public Tender “Fiasco”
Patrick McLoughlin, the U.K.’s Secretary of State for Transport announced this week that the competition to manage the country’s busiest intercity train line (the “West Coast Main Line ” that connects London to Glasgow and serves more than 31 million passengers each year) has been cancelled following the discovery of significant technical flaws in the way the franchise process was conducted. The decision means that the Department for Transport (“DfT”) will no longer be awarding a franchise contract to run the West Coast service when the current franchise expires on December 9. The flaws uncovered relate to the way the procurement was conducted by department officials. McLoughlin has also ordered two independent reviews to be undertaken by leading businessmen. The first review will look at what went wrong with the West Coast competition and the lessons to be learned, while the second will look at the wider DfT rail franchise program.
The $1.45 Billion rail franchise was recently awarded to FirstGroup plc but that award was challenged in court by the incumbent, Virgin Rail Group. As the DfT prepared its defense, it identified errors in “the way the level of risk in the bids was evaluated [and determined that] mistakes were made in the way in which inflation and passenger numbers were taken into account and how much money bidders were then asked to guarantee as a result.” Three DfT members of the procurement team in charge of the rail franchise award have reportedly been suspended and the DfT plans to start the tender process over at a cost that one group estimates to be almost $65 million.
DuPont CPO Named Among the “Most Powerful Executives in America” by Black Enterprise Magazine
We extend our congratulations to “friend of the site,” Shelley Stewart, who joined DuPont from Tyco in July (as reported in this story on CPO Rising) was named by Black Enterprise magazine to its “100 Most Powerful Executives in Corporate America” list. I did not speak to Shelley about this but he was quoted as saying, “I am truly grateful for this recognition and humbled to be on a list with so many esteemed leaders. In order to be successful in today’s global economy, it is important to trust in yourself and be willing to collaborate with others to find innovative solutions.”
SAP Completes Acquisition of Ariba
The $4.5 Billion deal announced in May {and covered in these two CPO Rising stories: Instant Analysis: Acquisition in the Clouds – SAP to Acquire Ariba for $4.3 Billion and M & A(riba) – SAP’s Big Bet) closed on Monday. Ariba will continue to operate as an independent business of SAP and will be led by the current Ariba management team. Watch for additional coverage here and in Ardent Partners’ Research Library.
SciQuest Acquires Assets of Spend Radar
Also on Monday, SciQuest completed the acquisition of substantially all of the assets of Spend Radar, an independent spend analysis solution provider. SciQuest purchased Spend Radar’s assets for approximately $10 million ($8 million in cash and $2 million in stock). SciQuest may also pay an earnout of up to $7.5 million consisting of cash and stock if revenue from the Spend Radar solution hits certain targets over the next 5 quarters. This acquisition follows SciQuest’s acquisition of Upside Software as covered in these two CPO Rising stories: Instant Analysis: SciQuest Sees “Upside” in Contract Lifecycle Management (I) and Instant Analysis: SciQuest Sees “Upside” in Contract Lifecycle Management (II).
CPO Rising will publish an analysis of the Spend Radar acquisition next week.