New blockchain protocol could improve procurement

A new blockchain tool developed by a researcher at the University of Waterloo, Canada, and a collaborator at Airbus in Germany could make procurement of goods and services safer and more impartial.
The tool called Strain, a blockchain auction protocol that allows for safer and more secure bidding on contracts with companies, makes the online auction more difficult to hack or manipulate than conventional methods.
“The goal is to have something that is traceable, cannot be tampered with in any way, and is confidential except for absolutely necessary information that needs to be revealed,” said Florian Kerschbaum, a computer science professor and director of the Cybersecurity and Privacy Institute at the University of Waterloo. “While blockchain can provide a strong audit trail, it is slow and generally shares too much information.”
The researchers understood that the protocol needed to be fast and secure at the same time. Currently, blockchain message exchange can take up to an hour to correctly settle for consistency and to handle competing lines.
Protocols are not tuned for blockchain in auction situations, in general. In contrast, the new auction protocol Strain requires only four blocks: a commitment of a bid, a computation of the winner, a verification, and finally an opening of the winning bid.
Strain protects the confidentiality of the bid against malicious parties using zero-knowledge proofs. This means that it reveals only that the computation is complete, but not the inputs or computational steps. It even offers an extension that would allow a vendor to participate in two auctions without revealing that they are the same bidder.
Ukraine is an example of a country that is using blockchain technology to hold auctions in a way that addresses concerns of nepotism and corruption.
Moving forward, Kerschbaum and his collaborator Erik-Oliver Blass at Airbus, would first like to further the performance and security of the protocol. They would also like to see if they can extend this to an open group of vendors as it has only been tested with a closed group.
The paper, Strain: A Secure Auction for Blockchains, appeared in the proceedings of the 23rd European Symposium on Research in Computer Security.
 

CSIRO Blockchain to help your purchasing

CSIRO’s Data61 has formed a consortium with law firm Herbert Smith Freehills and IBM to build Australia’s first cross-industry, large-scale, digital platform to enable Australian businesses to collaborate using blockchain-based smart legal contracts.
Known as the Australian National Blockchain (ANB), the new platform has the potential to represent a significant new piece of infrastructure in Australia’s digital economy, enabling companies nationwide to join the network to use digitised contracts, exchange data and confirm the authenticity and status of legal contracts.
Once completed, the ANB will enable organisations to digitally manage the lifecycle of a contract, not just from negotiation to signing, but also continuing over the term of the agreement, with transparency and permissioned-based access among parties in the network. The service will provide organisations the ability to use blockchain-based smart contracts to trigger business processes and events.
ANB will provide smart legal contracts (SLC) that contain smart clauses with the ability to record external data sources such as Internet of Things (IoT) device data, enabling these clauses to self-execute if specified contract conditions are met.
For example, construction site sensors could record the time and date of a delivery of a load on the blockchain and trigger a smart contract between the construction company and the bank that would automatically notify the bank that terms have been met to provide payment on that load delivery.
ANB will be the first large-scale, publicly available blockchain solution available to businesses of all kinds across Australia, and designed for Australian legal compliance.
Blockchain is a distributed ledger technology that enables permissioned sharing of an immutable record among parties to create consensus and trust. It empowers multiple trading partners to collaborate and establish a single shared view of a contract without compromising details, privacy or confidentiality. Blockchain-enabled smart contracts also hold the potential to be used with AI and advanced analytics to help ensure regulatory compliance or to provide new business insights.
“Technologies like blockchain are set to transform the legal industry and the wider business landscape as we know it,” Natasha Blycha, Blockchain and smart legal contract lead from Herbert Smith Freehills said.
“This presents a huge opportunity for agile and forward-thinking firms and has potential to deliver significant benefits to our clients and the business community as a whole. Our clients are enthusiastic about process automation, and how it can support a move away from paper-based systems, simplify supply chains and quickly and securely share information with customers and regulators.”
Consortium partners Herbert Smith Freehills, Data61 and IBM will first test the concept as a pilot project, using IBM Blockchain. The consortium is already working with another Australian law firm to bring the ANB to market. Going forward, regulators, banks, law firms and other Australian businesses will be invited to participate in the pilot which is expected to start before the end of the year.
“IBM Blockchain and the IBM Cloud provide the highest level of security to support even highly regulated industries such as healthcare and government, and IBM has extensive experience building blockchain networks and convening large consortia focused around solving important business problems,” said vice president and partner, cognitive process transformation at IBM Global Business Services Paul Hutchison.
“Blockchain will be to transactions what the internet was to communication – what starts as a tool for sharing information becomes transformational once adoption is widespread. The ANB could be that inflection point for commercial blockchain, spurring innovation and economic development throughout Australia.”
In 2017, Data61 delivered two comprehensive reports for Treasury on how blockchain technology could be adopted across government and industry in Australia.
“Our reports identified distributed ledger technology as a significant opportunity for Australia to create productivity benefits and drive local innovation,” said senior research scientist at CSIRO’s Data61 Dr Mark Staples.
“Data61’s independence and world-leading expertise will help to catalyse the creation of digital infrastructure for Australian businesses to transition to a digitally-enabled future. For complex enterprise contracts, there are huge opportunities to benefit from our research into blockchain architecture and into computational law. Smart contracts have many applications, and as the ANB progresses we look forward to exploring other business use cases to roll out.”
Should the Australian pilot be successful, the consortium intends to roll out the technology to other markets beyond Australia.
 

Plan4demand – your MHD article for this week

Rod Hozack

In this series, we explore how the longer-term demand plan should play a more prominent role in businesses. The first two parts will deal with the key elements in setting up the demand planning and forecasting process, and later, we will explore what are the key behavioural elements, i.e. what do we do with the process and the outcomes when we get them. Demand planning and forecasting is a critically important ‘front end’ of not only supply chain planning processes but business planning processes. Often, however, the whole organisation misses the opportunity to use the demand plan – both in the short term and the longer term – to guide the rest of the business. The longer-term part of the forecast (or more appropriately, the demand plan) is often ignored by the sales team and there is often very little marketing overlay and input into setting direction for the longer term.
Improving forecast accuracy is proven to have numerous significant business benefits, and best-practice companies are typically ‘all over’ accuracy, especially in the near term.
Why is it, though, that the integrity of the longer-term demand plan does not always have
the same focus? As one senior executive was overheard saying recently, “If you get the month right, then the longer term will take care of itself”.
Unfortunately, there is a chicken and egg aspect to this statement as we’ll see later in this paper. The real reason probably lies in the inability, or unwillingness, to communicate bad news early. It is too common for the sentiment about the emergence of a gap to strategy later in the year, that is  ‘we’ll deal with that when we get there’.
Anchoring
A fundamental psychological element is to have a mechanism to gain an objective view of the future. It is called ‘anchoring’ and is about making sure there are boundaries to the demand projections. The primary way to do this is to use statistical forecasting techniques and predictive analytics to ensure the sales projections are as objective as possible. Research has demonstrated that in many environments, statistical algorithms are better at predicting the future, at least in the short term, than human beings.
Hence, statistical forecasting techniques can serve as a powerful anchoring effect, so any large deviations to projections that Marketing or Sales may suggest, can be anchored back to something more objective. This tends to take the emotion out of the numbers and starts a dialogue on the differences in thinking and perspective instead.
So that’s the good news. However, using only history to predict the future is fraught with danger. The two main issues are:

  1. Statistical algorithms rely on historic sales and the assumption is that the trend, or curve of ‘best fit’ from this past data, will continue – in other words, statistical forecasting won’t be able to predict what is going to be different about the future.
  2. This is linked to the first issue in that trend analysis and using algorithms is the easy bit, but what is critical about longer-term projections is predicting change. So what we really need to know is:
  1. When is the trend going to change?
    b. By how much is it going to change?
    c. How long will the change last?

The problem we’re trying to solve then becomes: how can we use history, and our knowledge
of the future, to create a robust longer-term demand planning environment, one that aligns with strategy and that everyone understands and trusts? What I mean by ‘understand’ is that while there is an acceptance that predictions are never going to be perfectly right, agreement needs to be gained on the bandwidth of variability and inherent uncertainties in trying to predict future outcomes. This needs to be built into the planning process.
5 keys of demand planning
It is important to keep in mind the working assumption that the demand plan is the plan that underpins all other plans in a business, e.g. supply, inventory, financial, strategic, people, and infrastructure. Without this in place, plans are just unaligned guesses, and highly likely to be different from one department or function to the next.
So, back to our topic of ‘Realising the Full Potential of Demand Planning’: there are 10 keys to making sure we have congruence between our demand plans and strategy – we will cover five in the first two articles and the remaining five in following ones.

  1. Make sure the monthly management process horizon is at least a rolling 24 months

“We used to take three months to do the ‘latest estimate’, and then another three months to do the budget … this left only six months of the year to be actually doing anything valuable. Now budget is a significant non-event.” — A CFO’s delight
When it comes to demand planning, many companies focus their time on the next month; maybe the next quarter. Thereafter the budget (and sometimes an un-reviewed statistical forecast) is inserted to flesh out the rest of the financial year, but this encourages ‘hockey stick forecasting’ (see Figure 1.), which is particularly commonplace when sales are consistently tracking behind budget. In this situation most organisations will still be forecasting throughout the year that they will achieve budget, so there is a resultant cumulative error, commonly known as bias.
Typically, the gap between forecast and reality only becomes visible through a quarterly or half-year ‘latest-estimate’ process and then the solution is to just say something like, ‘with all the new initiatives we’ve put into plan, or that we can bring forward from next year, we’re still going to hit budget’. When the impact of these ‘recovery plans’ are time-phased into monthly buckets, the resultant graph looks Figure 1… ‘mission impossible’.
The reverse situation is also true. If companies are tracking ahead of budget, there is a tendency not to show the full potential of the plan, and worse still, as they get towards the end of the year, push sales into the following 12 months.
Imagine the chaos this causes if all other plans in the business are linked to those projections. Of course in such circumstances, people try to be clever and don’t link their plans directly to the demand plan, using their discretion to hedge against this ‘game playing’. Unfortunately, this results in multiple numbers; the value of integration is lost.

” Improving forecast accuracy is proven to have numerous significant business benefits, and best-practice companies are typically ‘all over’ accuracy.”

So, what’s the solution? Some organisations resolve this by looking out to the end of the current financial year, and while this keeps some focus beyond the current quarter, it very quickly becomes compressed into conversations about ‘how are we going to end the year?’ This is also known as a ‘compressing horizon’ or the ‘accordian horizon’ (see Figure 2.).
More sophisticated organisations take the next step and insist on a monthly process that assesses an 18-month horizon and this at least gives visibility of next financial year, six months in advance. However, in reality, it’s barely enough, since many companies start their budgeting process around six months out, so the first cut of the budget, is only at that 18-month horizon.
Anyone who has been in business for a little while knows that the first draft, or ‘roughly-right’ budget plans, become the anchor to which all subsequent deviations must be explained.
So a better approach is to make sure the monthly review cycle has at least a rolling 24-month horizon (see Figure 3.). This means there are six months to get the first draft of the budget as good as it can be, but avoids a 12-month budgeting process.
In this way, the senior leadership team gets a view of the next year’s plan in full, right at the time the financial year is starting. As the team learns more about the integrity of the underlying assumptions through the execution of ‘this year’s plans’, the underlying assumptions about next year can be iteratively refined and applied in readiness well before the point of commitment.
The result is that senior managers are so confident of ‘delivering this year’, they are freed up to focus on strategy. It may take two or three iterations before their confidence reaches the appropriate level, but the important thing is to make a start.
It also makes the whole budgeting process a significant non-event – ‘significant’ in that it is vital to have a budget, but a ‘non-event’, because the budget comes automatically from the rolling monthly projections.
These days, many companies are even projecting out to a 36-month horizon because they know how important it is to spend time anticipating future issues and opportunities, before they become today’s problems. If you think this is just hypothetical, when I left industry in 1996, our IBP process was routinely looking out 36 months, with technology that was way less sophisticated compared to what is available today.
With the tools that are available today, there really is no excuse.
A simple test of having a valid budget is that when the senior team looks at the opportunities and risks to achieving the plan, they are evenly balanced either side of the most likely outcome (see Figure 4.). Most companies, however, tend to ‘bank’ all their opportunities in their annual budgets, and then spend the rest of the year dealing with risks of not delivering the plan, which is not a very uplifting environment to be in.
This article will continue in the September-October issue of MHD Supply Chain Solutions magazine.
Rod Hozack is a partner at Oliver Wight. For more information email information@oliverwight.com or visit www.oliverwight.com.
 ” More sophisticated organisations take the next step and insist on a monthly process that assesses an 18-month horizon and this at least gives visibility of next financial year, six months in advance.”
 
 

Figure 1.

Figure 2.

Figure 3.

Figure 4.

 

WTO deal an export boost for government suppliers

“Access to foreign markets is extremely important for businesses that provide goods and services to governments,” said CEO of the Export Council of Australia (ECA) Alina Bain.
The ECA was welcoming the news that Australia has received support to join the World Trade Organisation’s Agreement on Government Procurement (GPA).
“The GPA is all upside,” explained Ms Bain. “It opens up new markets to Australian businesses and has minimal — if any — impact on Australian procurement processes.”
Australian Government procurement processes are already largely consistent with the GPA, meaning the parties to that agreement already have access to Australian government procurement. The GPA also contains carve-outs for sensitive areas such as defence, security, indigenous, SME and local government procurement.
“Australia joining the GPA will deliver immediate benefits to Australian businesses in two ways,” said Ms Bain. “Firstly, it will guarantee access to GPA markets that are not currently covered by trade agreements with Australia. Most notably, this includes the EU and its member states.
“It also extends government procurement access to major US states not covered by AUSFTA, including Arizona, Iowa, Massachusetts and Minnesota. These states alone have a combined gross state product greater than Australia’s GDP.
“Secondly, and perhaps more importantly, it will allow Australian businesses to have complaints about government procurement reviewed by independent bodies. This is important, as members have told the ECA of discriminatory practices when they try to access government procurement in some GPA member markets.”
The WTO estimates the GPA provides guaranteed access to members’ government procurement of $US 1.7 trillion p.a.

New slavery regulation coming to Australia: are you prepared?

The Chartered Institute of Procurement & Supply (CIPS) has announced the findings of its first Australian Modern Slavery Survey, which reveals most procurement managers are ill-prepared for the new Government requirements.

  • 45 per cent of procurement managers describe the requirement as a timely and necessary piece of legislation, but a quarter of all respondents are concerned it will ultimately have little impact.
  • 1 per cent of procurement managers don’t think their organisation would be able to release a statement based on current monitoring, policies and supply chain management practices. More than a quarter (28.8 per cent) don’t know if they could.
  • To date, 20 per cent of organisations haven’t taken any measures to ensure a slavery free supply chain.
  • Nearly 20 per cent (19.9 per cent) of those surveyed do not know who in their organisation is ultimately responsible for ensuring their supply chain is free of modern slavery and human trafficking.
  • 80 per cent of respondents identified reputational risk as the most concerning factor in finding modern slavery in their organisation’s supply chain.

The online survey, carried out over a four-week period in April to May 2018, coincided with the Government’s 2018 budget announcement last week, aimed at strengthening Australia’s response to modern slavery. The new reporting requirement will oblige more than 3,000 large corporations and other entities to publish annual public statements on their actions to address modern slavery in their supply chains and operations.
CIPS general manager for Australasia Mark Lamb said that despite concerns about local readiness to comply, there is overwhelming support within the procurement and supply chain community for the legislation. Mr Lamb said: “According to our survey, 80 per cent of procurement managers in Australia consider the introduction of requirements as a step in the right direction in stamping out modern slavery.
“More than 40 per cent of those surveyed have put clear procurement policies in place. However, one in five of Australian procurement leaders haven’t taken any measure at all to secure their supply chains.”
Mr Lamb believes the reason for this is a lack of awareness and training. He said: “Our research shows that more than half (54.9 per cent) of managers lack confidence that their supply chain managers have sufficient skills and expertise to minimise the occurrence of modern slavery in their supply chains.
“CIPS firmly believes that accountability for inadequate or exposed supply chains sits firmly with procurement professionals. CIPS is leading the way on raising awareness of modern slavery in supply chain, as well as equipping procurement and supply management professionals with the necessary tools and guidance to address this issue in their own organisations.”
About the survey
The survey was conducted online via SurveyGizmo and managed by CIPS Australasia, over a four-week period between 11 April 2018 and 13 May 2018. 195 respondents completed the survey. 72.3 per cent of respondents have an annual turnover of $100million.
 

Hays releases 2018 Jobs In Demand report

Recruiting firm Hays has released its latest Jobs In Demand report, covering January to June 2018.
The company expects strong demand to continue in the logistics industry for persons with expertise in the areas of inventory management, import/export, wharves and fast-moving consumer goods (FMCG) planning.
“Across Australia, positive productivity is linked to efficiency improvements, be that in warehousing, transport or supply chain,” the company said. “Companies are targeting candidates who have a strong knowledge of systems and processes, combined with a proven track record in reducing costs and achieving demanding KPIs [key performance indicators].”
The report identified several roles that the industry is currently keen to fill, including storepersons with inventory management software experience, import/export coordinators with cargo software knowledge, fleet controllers with wharf experience, demand and supply planners with FMCG experience.
Experience in purchasing will also be in demand, as will candidates with knowledge of inventory management software such as enterprise resource planning (ERP) and SAP software.
Hays is also seeing an increased need for logistics candidates with heavy rigid or heavy combination licences.

Australian Maritime College launches new logistics degrees

Tasmania-based Australian Maritime College will offer two new degrees from 2018 – the Bachelor of Global Logistics and Maritime Management (Honours) and the Master of Logistics Management (Advanced).
According to Dr Peggy Chen, Interim Head – Department of Maritime and Logistics Management, logistics is the key to international trade and the new degrees will help support the developing needs of the important sector.
“We are very excited to see these two degrees offered to keep our advantage in providing a unique undergraduate degree with two cores – global logistics and maritime management, and to provide specialised logistics management at master level,” said Dr Chen.
The Bachelor of Global Logistics and Maritime Management (Honours) is a four-year program designed to prepare students for management careers in the maritime and logistics industry.
The course combines core business principles, such as accounting and finance, business law, international business management, and strategic management, with industry-specific learning, such as port and terminal management, ship operations management, maritime economics, logistics management and supply chain management.
The Master of Logistics Management (Advanced) is a two-year program designed for people seeking professional careers in the global domain of logistics management, logistics strategies and supply-chain management.
The program provides theoretical, practical and applied knowledge suitable for both higher-level professional and managerial roles.
Dr Chen said the decision to offer the new courses now is deliberate, reflecting industry needs and capitalising on the demand for specialists.
“AMC was among the first to observe that traditional shipping companies suddenly transformed into more of logistics service providers, because this was where the demand was and continues to be. The maritime and logistics industries underpin international business and world trade,” she said.
The Bachelor of Global Logistics and Maritime Management (Honours) replaces the Bachelor of Business (Maritime and Logistics Management), which Dr Chen said has reflected industry needs for more than a decade.
In the development of the Master of Logistics Management (Advanced), AMC seeks to respond to the expected increased demand for specialists in areas such as logistics management, supply chain management, warehousing and procurement.
It follows three market surveys conducted in 2016 which focused on the potential for growth in student enrolments in the postgraduate space, for prospective student cohorts from either Australia or overseas, including countries such as India, China and South-East Asia.
“Further provision of education in logistics management through these new courses will build AMC’s reputation in providing specialised workforces and experts in facilitating or managing Australia and international supply chains, in particular in the maritime supply chain,” said Dr Chen.

Broadspectrum CPO named Asia-Pacific CPO of The Year

Broadspectrum Chief Procurement Officer Kevin McCafferty has been credited with flipping the old perception of procurement as a back-room entity on its head, by introducing a value-based approach to procurement and dramatically transforming the function into a customer-oriented, bottom-line focused team.
McCafferty’s achievements in consistently achieving both financial and operational objectives were recently celebrated at the CPO Forum Gala awards, hosted by procurement consultancy The Faculty.
Overseeing a procurement spend of $1.8 billion, Kevin McCafferty, Executive General Manager – Procurement, Australia and New Zealand, won the 2017 CPO of the Year award, after significantly increasing spend under management and delivering over $50 million EDITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) benefits, against an initial target of $30 million.
“Since joining two years ago, Kevin has made a significant difference to the procurement function within Broadspectrum,” said Vince Nicoletti, Chief Financial Officer, Broadspectrum. “His strong transformational change leadership has seen the area move to a more strategic function within the business, which is now delivering bottom-line results and benefits.”
“Kevin and team have also driven commercialisation of procurement and supply chain services into Broadspectrum’s contracts with clients.”
McCafferty said, “What I discovered when I first started this role was that the approach to procurement was very inward-facing, while the rest of the organisation was focused primarily on the customer. This difference in our focus represented a lack of alignment, so my priority has been to change the thinking across the three teams under procurement’s umbrella.”
View a 60-second interview with McCafferty below.

Seeing logistics in 3D

From hearing aids to jet engines, 3D printing is revolutionising the world of manufacturing.
Of all the ways 3D printing will change the world, the democratisation of manufacturing is perhaps the most important. Think of it as the Uberisation of manufacturing, where supply can be accessed anywhere in the world to produce goods at the click of button.
This is a once-in-a-generation logistics opportunity, as so-called additive manufacturing will optimise the time and cost of making and delivering goods. Mass customisation will be the new normal. So what does this mean for the future of logistics?
Modern delivery and manufacturing
We’ll see more direct-to-person manufacturing as well as delivery. Physical stores will be reserved for generic goods, not items customised to the individual. Hybrid customisation has enormous potential for logisticians.
Imagine thousands of products from cell phones to blenders, each made with a common core but customisable covering. Third-party logistics providers are uniquely suited to move these items.
Logistics companies like UPS would simply store the common core in their warehouse, print the custom piece and finish final assembly near the point of consumption.
This would also disrupt service parts logistics. Right now, companies make and store hundreds of thousands of critical parts around the world at tremendous expense just on the off-chance that they’ll be needed for an emergency repair.
In the future, these slow-moving parts will be stored virtually and printed on demand. As a result, import and export costs – especially important to small businesses – will plummet dramatically.
As companies begin to take advantage of designing parts for 3D printing, the manufacturing industry will re-invent itself. Machines designed to construct a specific product will give way to 3D printers capable of making many different items.
This will be the sparkplug for efficiency across supply chains. It will revolutionise how we get items to your doorstep. And it will forever alter how you search for and purchase goods every day.
Even though 3D printing is a 30-year-old technology, we’re just scratching the surface of where additive manufacturing will take us. These printers are no longer reserved solely for prototyping and product design.
We’ve moved beyond trinkets and souvenirs to items like hearing aids and aircraft parts, proving this is no fad.The global 3D printing market will exceed $21 billion by 2020, according to Wohlers Associates.
3D printing demands
In addition, the demand for 3D printers, materials and services will surpass $10 billion by 2018, the consulting firm found. Such promise is why UPS recently partnered with software company SAP to expedite the manufacturing and delivery of 3D-printed parts.
Customers can go online and place an order through the Fast Radius website and these items will be printed either at a UPS Store location or printing facility connected to our air hub in Louisville, Kentucky – in as little as a day.
This effectively creates end-to-end industrial manufacturing. And we expect these efforts to go global in the near future.
Moving beyond logistics, however, 3D printing will change the way we think. It will change how future generations learn and see the world.
This technology can now keep pace with anything we imagine. We’re no longer forced to innovate in a world shackled to existing infrastructure. If you can think it, you can do it.
Reprinted with permission of Longitudes, the UPS blog devoted to the trends shaping the global economy.

©2019 All Rights Reserved. MHD Magazine is a registered trademark of Prime Creative Media.

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