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Mars Bar Shortages – Is This The End Of Civilisation?

Never mind Ukraine, the energy and cost of living crisis and the national political paralysis in the UK – a real crisis has hit the headlines. The shops are running out of Mars Bars!  I spent the first nine years of my post-Uni career at Mars in Slough. It was a great firm, and still is, I believe.  But it seems hard to accept the official company line that “high levels of demand” is the cause of these shortages.

Various press reports suggest that many supermarkets and wholesalers are out of Mars Bars, with some shortages reported for other products from Mars Confectionery such as Snickers and Twix.  (Personally, when I had a free choice every morning in the office, I chose Twix over Mars, and actually also preferred Revels, Topic, Maltesers and of course the finest  confectionery product ever invented – Plain Bounty).

Looking at this issue, it’s worth understanding some of the core principles of Mars and indeed the confectionery industry. Most purchases of Mars Bars are “impulse”. Now things have changed a bit over the last 30 years, with a much higher percentage of products bought from supermarkets rather than corner shops, newsagents and sweet shops (remember those?) But even supermarket multipacks are quite likely to be the sort of item that isn’t necessarily on the shopping list, but just gets picked up on impulse.

Other items are “demand” items – customers demand them and will go to another shop if they can’t find it in their usual place. Milk, tea bags, vegetables, maybe beer these days… So if you are selling an impulse item, “availability” is the whole basis of your sales strategy. Forrest Mars Senior (now deceased) was obsessed with getting Mars products on sale and prominently displayed in every possible location where a customer might feel a bit peckish, or fancy a treat. He will be turning in his grave at these stories of out-of-stock products in major retailers. So what has caused the problem?

I think we can rule out the demand factor, whatever the firm is saying. Confectionery sales are correlated with temperature in the sense that heat reduces demand quite significantly. We’ve had the hottest summer ever in the UK. So although it has cooled down a little in the last week or two, I just don’t buy the claim that somehow consumer demand has overwhelmed the Mars factory. So what else could it be?

Well, it could still be temperature related. Chocolate is very temperature-sensitive stuff, as you will know if you’ve ever left a Mars Bar in your car, handbag or jacket pocket on a hot day! Not pleasant…  It may be that the super-hot temperatures we have seen has somehow disrupted production. I seem to remember the Chocolate Room (yes, that is a real thing in the Mars factory) could overheat at times. Perhaps production was reduced in July because of the 40C temperatures and that is feeding through to the shops now? Or maybe finished stock got heat damaged?

Another possibility is supply chain issues – a lack of raw materials, or perhaps even packaging (I speak as the ex-Head of Packaging Buying in Slough). But I suspect that we would have seen more general industry issues if this were the case. Mars has always been one of the best firms in the sector in  terms of procurement, and has followed a more “partnership” approach than many competitors. That is in part because of “mutuality” – one of the famous Five Principles of Mars.

It means that everyone who interacts with the firm should benefit from it and whilst we occasionally joked about that when we were in tough supplier negotiations, basically it did matter. So I find it hard to believe that Mars would be finding the supply chain more difficult than Cadburys, Nestle or Hershey.  However, Hershey has also warned of shortages, so maybe there is something in this hypothesis.

The critical nature of raw materials also means that if there were shortages, I would expect Mars to pay more than most would to preserve supply. As well as the availability and impulse issue above, Mars would be terrified that a 200-Bars-a-year customer might try Cadbury’s Star Bar in the absence of their favourite and think “oh that’s nice”. OK, that’s unlikely as Star Bar is a disgusting “rework product” – maybe I’ll explain that another day. But you get the point.

Could it be staff sickness or shortages? I doubt it. The factory is highly automated now and Mars pays well above the norm so it seems unlikely. Equipment breakdown? Again, Mars is very smart, has top engineers – I just can’t imagine that. Perhaps a commercial dispute with the supermarkets is the issue, as we saw recently with Tesco versus Heinz and Mars Petcare (Whiskas etc).  Well, none of the retailers have said anything and the fact that the wholesale channel is also reporting difficulties seems to suggest this isn’t the case.

The only other possibility I can think of is some quality problem with a large batch of product. Whilst Mars QA and testing is second to none, it is always possible that a dodgy batch of skimmed milk or freeze-dried albumen powder got into the production process somehow. If it was only discovered some days or weeks later, maybe product had to be scrapped? It seems unlikely but it is possible.

Anyway, someone must know. Drop me a confidential note if you know more. In the meantime, Cadburys Caramel, Rowntree’s Toffee Crisp, and Kit Kat (preferably plain chocolate) are the substitutes of choice.  

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Professional Services – Procurement Has Failed

Unfortunately, procurement as a function has failed.  Not everywhere, not in every organisation, but across some huge and important markets, we have failed.

Reports last week in the Evening Standard – and elsewhere – lead to that unfortunate conclusion.

“UK partners at accountancy and consulting firm PwC were paid an average of more than £1 million for the first time last year. The London-based giant said consulting revenues were up by a third reflecting “exceptional clients demands to challenges and opportunities on multiple fronts”.

Group profits grew 24% to £1.4 billion in the year to end June and profit per partner averaged £920,000, up 12%. This was topped up by an average of £105,000 per partner in the firm of a distribution from the sale proceeds of PwC’s global mobility and immigration arm …”

And there are almost a thousand partners in the UK; 944 to be precise earning this huge amount. But they’re not entrepreneurs. They have not built a business, they don’t run a business and most of them are looking after relatively small teams, not the thousands of people many CEOs manage. They might create some value for clients, but I don’t think you can compare their work to being CEO of even a fairly small business, or being a business owner and entrepreneur trying to build a successful enterprise. Yet somehow, they are extracting a million each, every year, from the economy.

Fiona Czerniawska and I wrote “Buying Professional Services – How to get value from  consultants and other professional services providers” back in 2010. It remains I believe pretty much the only book focused on that specific area of procurement. Our focus was consultancy, audit and legal services, and we tried to lay out how buyers could achieve better value in these tricky markets. Procurement has a relatively short history in these spend areas – 30 years ago there was little procurement involvement in these categories even in the largest organisations. So you would hope that the more recent involvement of the profession would have helped make these markets more competitive and we would see better value for users.

But year after year, we see audit scandals, unsatisfactory consulting work, and yet the earnings of partners seems to just go up and up.  Surely, if procurement had really got to grips with these spend categories, we wouldn’t be seeing this? It is even more startling in the legal world, with Freshfields partners hitting the £2 million mark this year.

Clearly, there must be market issues here as well as questions of competence.  In the audit area, the greater regulation of that profession, put in place with good intent to raise quality, has succeeded in also raising the barriers to entry. So it has been very difficult for smaller firms to challenge the big four.

In the consulting and legal world, there are more complex factors at work. I believe that many CEOs and CFOs are happy to pay high fees and see partners earning so much, because it helps them justify their own salaries.  The executive remuneration consultants ( another highly questionable branch of the professional services world) can say to a Board, “if a PWC partner earns a million, you better pay your CEO at least that”.

Another problem is that procurement often comes up against the user of professional services who doesn’t want to see competition and just wants their favourite law or consulting firm, probably engaged on a day rate basis so the user doesn’t have to think too hard about outcomes or deliverables.   But we all know how important competition is to moderate costs; too often we still don’t see that in this world. And ongoing “contract management” of assignments is often dreadful or non-existent. How much of a partners’ earnings can be traced back to “land and expand” strategies, for instance, or projects that run on and on beyond their supposed delivery dates?

The hollowing out of businesses (and public sector bodies) over the years in the cause of efficiency is another factor. Downsizing and outsourcing has left organisations unable to resource new projects or anything out of the ordinary – so the consultants get called in.  For instance, PWC partners must be delighted to hear that the UK Tory government wants to cut civil service numbers by 25% – that will mean yet more lucrative work for them!  Which will no doubt be based on a Crown Commercial Services framework contract with consulting firms that when put in place made little attempt to drive real competition or push the firms into offering better value. 

The growing complexity of the business world is another driver, and we can’t blame the providers for that. Whether it is leading-edge technology or international patent law, organisations face more and more complexity and it is not surprising that external expertise has become more critical to success.

But even given that caveat, it seems clear that we have failed to get to grips with professional services procurement.

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Top Acts Pull Out of Reading and Leeds Festivals – Bad Supplier Behaviour

How should you react if a supplier lets you down? If it is a minor issue, a quality failure perhaps, or a lightly late delivery, then you discuss the issue, what might be needed to avoid a repeat, and perhaps administer some sort of direct critique – “we’re very disappointed in you….”  You might take more severe action if minor problems become frequent of course.

But what if the supplier really lets you down? What if, shortly before they are due to deliver something – maybe raw materials, components, or some new tech equipment – they tell you they can’t. Or perhaps a lawyer who is collaborating with you on a big project says they can’t make that critical meeting on Friday – even though you’ve got the CEO and CFO both lined up to attend?

Then, when you ask why, they tell you that basically, they’ve had a better offer from another customer. Going back to my first procurement job at Mars, maybe a supplier of orange juice tells me that Rowntree’s have offered more so the shipment is going to them. “Your contract is at £1 a litre – they’re offering me £2 a litre”.  But, I say, we might have to close down the Starburst production line for a week! Tough, says the supplier, that’s business.

That is an approximate analogy to what has happened with Reading and Leeds music festivals. Jack Harlow and Italian rock band Maneskin, both near the top of the bill, pulled out of next week’s festival in recent days. (Harlow is a boring white US rapper – Pitchfork said his latest album was “among the most insipid, vacuous statements in recent pop history”. )

Their reason appears to be that both were offered live slots at the MTV VMAs (video music awards) in the US next weekend. Actually, I’m not sure MTV will have offered lots more money; it is probably an “exposure” factor that has made the artists and their managers decide to let down some 150,000 UK live music fans.

Going back to Mars, let’s consider how procurement would respond to this sort of action. It’s easy to say that you would never work with that supplier again, but that would come down to power and market situation (if they are my only approved supplier of orange juice, I have a problem). But if I had the opportunity to exclude that firm, possibly forever, I would certainly do so. They have betrayed my trust and that is not easily remedied.

I might also look at taking legal action. Can I sue for breach of contract, and claim damages – such as the cost of shutting down the production line, perhaps? It will depend on the contract, but generally “force majeure” incidents which allow contractual terms to be ignored are quite different from someone just overtly breaking the contract for commercial reasons. Note that Rage against the Machine pulled out of the festivals too recently – and they were a headliner – but one of the band is ill and their entire European tour has been cancelled. That is quite different from the VMA issue.

So I hope Harlow and Maneskin get backlisted by every festival in Europe from now on, and that promoters of any gigs with them understand they are not to be trusted and should look at having really punitive clauses in their contracts. I hope Reading and Leeds have also been compensated in some way – otherwise I don’t know why they wouldn’t take some sort of action against the acts. There’s also a reputational issue for the festivals here. If customers start thinking that you can’t trust the list of artists that are spread across the marketing material, why would I commit £250, months in advance, for a Reading ticket?

Anyway, not Bad Buying (unless Reading didn’t have a decent contract in place, of course); but certainly Bad Suppliers!

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Top German Broadcaster Resigns After Bad Buying (and more…)

In many countries, the image we have of German business and management is one of efficiency, formality and organisation. My view was shaken a few years back when I experienced the chaotic programme of work on the railways in and around Berlin, with chaos in stations and no help or communication apparent for confused travellers. Then we had the Brandenburg Airport fiasco, one of the best case studies in my Bad Buying book! It finally opened last year, 10 years behind schedule and billions over budget after a whole spectrum of incompetence, bad planning, fraud, and financial mismanagement had been demonstrated during its construction.  

Another more recent story shows that less than perfect side of German management. Patricia Schlesinger was the €300K a year the director (CEO) of Berlin-based RBB, one of nine regional public broadcasters in the country funded by the taxpayer. But she resigned this week after a series of accusations about money wasted, conflicts of interest and improper procurement – in fact, the word “embezzlement” is even being used.  Berlin’s public prosecutor is looking at accusations she used RBB funds to pay for lavish dinners at her home and private use by her husband of her company car and chauffeur.

Wolf-Dieter Wolf (crazy name, crazy guy…), chairman of the RBB board, also stood down. He is linked to some of the accusations and is seen as being complicit in her behaviour.  Perhaps most extravagant was the €658,112 spent on refurbishing her office, according to The Times – shades of Fred Goodwin, the ex-Royal Bank of Scotland head. When the new RBS HQ opened in 2005 there were reports of over-the-top office furnishings and his own “scallop kitchen” (denied by his lawyers, we should say)!

In Berlin, the parquet flooring for Ms Schlesinger’s office cost a mere €16,783, and (here comes a Bad Buying link) complaints by the internal compliance department that no other quotations for the work had been sought were overridden.

The accusations began in June with a report by the news site Business Insider that Schlesinger’s husband, Gerhard Spörl, a journalist, had been awarded a consultancy contract by the state-owned trade fair company Messe Berlin. That contract was allegedly signed off by the company’s supervisory board chief, the same Wolf-Dieter Wolf. Was this an example of nepotism and favouritism? Then other consulting-type contracts emerged with little evidence of proper procurement, with accusations of Schlesinger and / or Wolf in effect favouring their friends.

Of course, this apparent arrogance and disregard for rules is something we see frequently and is not limited by geography, sector or type of role. (The Bad Buying book has quite a few examples, as you might expect). The boundaries between disregard for the organisation’s money or rules and outright fraud are also sometimes difficult to define exactly. However, there seems to be a character trait that means some people just feel they deserve more, they deserve to be treated differently and the rules don’t or shouldn’t apply to them. Boris Johnson comes to mind, as does Carlos Ghosn, now an international fugitive after running Nissan and being accused of using corporate expenditure for his personal benefit.  

But back to the German broadcaster case, and I’m trying to think of a good way to close this article. I mean, if only there was a word for that feeling of pleasure we get from someone else’s misfortune, particularly when they think they’re better than you…!

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NHS Procurement Platform – Was it Bought Properly?

The UK National Health Service is one of the largest organisations in the world in terms of number of employees and its running cost. Whilst it is a single organisation in some senses, really it is made up of thousands of smaller organisations, many with considerable levels of autonomy. Even when we think about hospital trusts, each still has its own Board and is set up as an independent entity from a legal perspective, although that is slowly changing with the introduction of the regional Integrated Care System model.

So it is not surprising that over the years, there has always been tension in procurement between the urge to centralise and control more from “the top” (whatever structures might be defined in that way) against the desire for local autonomy and power.  Now no-one would argue for total centralisation (everything needed by every hospital bought from a huge central office somewhere) or total decentralisation (every doctor or hospital negotiating its own deals for pharmaceuticals!)

But getting the balance right has proved difficult. For instance, Ministers persist in claiming “the centre” did a good job in terms of pandemic PPE procurement. But the truth is that pre-pandemic central procurement strategy proved inadequate, and local action was needed to maintain supply in many hospitals. And whilst once the pandemic was underway some central activity was necessary, mandated central buying cost the UK billions in waste and super-profits for suppliers.

The new Chief Commercial Officer for the NHS, Jacqui Rock, who sits in NHS England HQ, recently launched a Central Commercial function for the NHS. A key strand of that is a technology initiative that is designed to help the manage procurement better across the system. The aim is to have a more common approach to procurement, and to start enabling better access to spend data across the whole network. That is a very sensible aim – gathering data does not mean in itself a more central approach to category strategies, and however you want to approach procurement, having good data is essential.

The mechanism for achieving this has raised some eyebrows though. Via Crown Commercial Services, all trusts, integrated care boards and other NHS entities can now use a software platform provided by Atamis, with CCS funding that to the tune of £13 million over three years (it is not clear if CCS has actually “pre-bought” licences here, which could be a risk in itself).

Atamis is a procurement and tendering platform with spend analysis functions as well as tools for managing programmes, tenders, contracts, and supplier relationships. It was chosen for use by NHS England and the central Department two years ago, although NHS Supply Chain chose software firm Jaggaer for their similar requirements.However ,this new contract with Atamis was put in place using the government’s Digital Marketplace, a set of frameworks that gives the public sector access to thousands of suppliers. And it appears that no competitive process was used to choose Atamis. They were simply awarded the contract. Now there are rules (laws) about when you can award a contract in that manner without seeking proposals from other firms also listed in the Marketplace. And I cannot see in this case how a “single tender” can be justified, when there are other firms on the framework who provide similar products and indeed supply many Trusts already.

I should say that I have no axe to grind with Atamis or their product. When I worked at Spend Matters, I had contact with the founder of Atamis and liked him and the business. But the firm was sold to a Canadian software company last year, and the NHS could represent a considerable proportion of their business.  There are also questions about what happens once the 3-year CCS funding ends, dependence (the Atamis product is built on the Salesforce platform) and “lock-in” to Atamis.

When the initiative was announced, there were a whole host of interesting comments from readers of the HSJ (Health Service Journal). This extract from one probably encapsulates much of the content.

“Why has the centre decided to create a monopoly situation, by endorsing, promoting and funding this only provider for, say contracts management? What happens to other providers with better value solutions? Should UK Tech Plc pack up and shut shop? Are these other solution providers now out of the whole NHS market? Why”? 

For me, the most fundamental question is whether it was legal and commercially appropriate to award the contract to Atamis without competition. (There are “business issues” too of course). The new central function should set a good example, and surely competition is the most fundamental principle of good procurement. But given the way the contract was let, I would not be surprised if we see challenges to that process from other suppliers who are clearly at a competitive disadvantage now, with Atamis being available “free”.  

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