Bain: Supply chain barriers cost 1.6 trillion globally

19 March 2013 Consultancy.uk

The existence of supply chain barriers across the globe leads to a massive value destruction. If every country improved just two key supply chain barriers – border administration and transport and communications infrastructure – even halfway to the world’s best practices, global exports could rise by 14.5%, equivalent to $1.6 trillion in value. Also this impulse could deliver between 23 and 110 million relatively well paid jobs to the world economy. This can be concluded from the report ‘Enabling Trade’ edited by Bain & Company  in cooperation with the World bank and the WEF.

The consultants differentiate between four major supply chain barriers that obstruct trading:

Bain - Supply Chain Barriers to Trade

These supply chain barriers have a detrimental impact on trading in 4 manners:
- A rise in costs, both higher operational costs and increased capital expenses
- Delay in decision making because decisions are less predictable and more analyses are needed
- Lowered volumes in trading activities
- Increased risk

In the report advisors come up with multiple examples. Because of all the administrative rigmarole, sometimes long lines arise at the border leading to the decay of agricultural trading products.  Also the chance of thievery increases when boarder completion is taking more time. In South-American countries boarder completion could even last ten times longer than it in the EU, this could result in higher costs. In some cases a combination of supply chain obstacles can become such a challenge leading foreign organizations unable to take up competition with rivals. If a company has to meet unrealistic demands (for instance environmental legislation or safety regulations) it simply becomes impossible for them to compete with local companies in executing certain assignments. More and more supply chain barriers are seen in the Far East or South-America. ‘In Argentina for example so many barriers are raised causing many companies not wanting to do business there anymore. They simply leave the country.’ Says Marco Kalleveen, partner at the strategy advisory firm.

Decreasing barriers more effective than abolishing fees

Bain & Company proclaims that countries should change their focus of attention when it comes to stimulating world trading. Up until now primarily ‘tariffs’ are negotiated. This includes import prizes and anti-subsidizing measures.  Calculations of the advisory firm show that dealing with supply chain barriers is up to 6x more effective than tariff lowering.

Bain - Supply Chain Barriers vs Tariffs

According to Bain, the chance for success is a lot higher when dealing with supply chain barriers. In the case of tariffs it usually comes down to a zero-sum game – one region makes a profit, while the other is losing at the same time.  By contrast, decreasing the supply chain barriers is a win-win situation. “For the reason that the advantages of a more efficient supply chain is divided more equally across countries, a lot more is to be expected  here” according the consultancy office.

Tackling trading barriers has been on the international political agenda for a long time now. Since the year 2001, in Doha, Qatar, 140 countries are negotiating on tackling trading barriers in promoting free international trading.

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Project management industry adds £156 billion of value to UK economy

15 April 2019 Consultancy.uk

Project management has grown into one of UK’s largest areas of business over the past decade, amid the increasing ‘projectification’ of work. With the gross value added to the UK economy by project management estimated to be £156 billion, this trend is likely to continue in the coming era.

Despite the huge success of project management in recent years, until now there has been relatively little data available on the size of project activity. As a result, there has been a great deal of debate on things like the number of people involved in the sector, the number of projects, and how it contributes to economic output. Due to this need for clarity, APM, the UK’s professional body for project management (the largest organisation of its kind in Europe, with 28,000 individual members) commissioned economists from PwC to shed light on the industry's economic impact.

The research concluded that the profession makes a more significant contribution to the UK economy than the financial services sector. 2.13 million full-time equivalent workers (FTEs) were employed in the UK project management sector, generating £156.5 billion of annual gross value added (GVA). In comparison, the financial services sector contributes £115 billion, and the construction industry adds £113 billion.

Gross value added to UK economy

Commenting on the discovery, Debbie Dore, Chief Executive of APM said, “Project management runs as a ‘golden thread’ through businesses, helping to develop new services, driving strategic change and sector-wide reform.”

Who is a ‘project manager’?

To reach these estimates, PwC’s researchers used detailed models to map out the value of project management activity. They ultimately defined relevant ‘projects’ as “temporary, non-routine endeavours or rolling programmes of change designed to produce a distinct product, service or end result… [with] a defined beginning and end, a specific scope, a ring-fenced budget, [and] an identified and potentially dedicated team with a project manager in charge.”

Building on this, they then went on to define what the act of project management actually is. The job consists of applying “processes, methods, knowledge, skills and experience” so that clients can meet their objectives and bring about planned outputs or outcomes. The analysts added that this includes “initiating the project, planning, executing, controlling, quality assuring and closing the work of an identified and dedicated team according to a specified budget and timeframe.”

Importantly, it should be noted that the profession is not exclusive to only roles explicitly labelled as ‘project manager’, but to any role where specialist project management skills are used. This means that across sectors these roles can have very different titles, from the self-explanatory contract managers of procurement, or the campaign managers of advertising, to the likes of festival co-ordinators in the events sector, and many more. The roles in question also span all strategic levels of the profession, from strategic to tactical and operational positions.

Gross value added of project management profession

From a sector perspective, the financial and professional services, construction and healthcare industries make up almost two-thirds of the total project management GVA. At the same time, understandably, the UK Government has a huge project portfolio, which further drives the size of the GVA the sector contributes, thanks to megaprojects like HS2 and Crossrail.

Commenting on this to the report’s authors, Oliver Dowden, Minister for Implementation remarked, “Project delivery is at the heart of all Government activity, whether it’s building roads and rail, strengthening our armed forces, modernising IT or transforming the way government provides public services to citizens. Getting these projects right is essential if we are to ensure that we build a country that works for everyone.”

Throughout 2019, 26 major government projects were delivered, representing a fifth of the overall Government Major Projects Portfolio (GMPP) of 133 projects. According to the IPA annual report 2017-18, these represented a whole life cost of £423 billion. In addition to this were a plethora of smaller scale projects, and those in early development.

Elsewhere, with the increasing digitalisation of the economy impacting entities of all shapes and sizes, IT and digital transformations tended to dominate the projects of the UK scene alongside new product development projects, with a respective 55% and 46% of organisations in the research sample having undertaken these types of project in the past year. At the same time, this varied across sectors, and unsurprisingly, in the construction and local government sectors, fixed capital projects were the main project type undertaken.

Outlook

Looking to the future, 40% of business leaders expect project management will grow in the coming years due to the increased use of projects – or the ‘projectification’ of the UK. In a trend that has been witnessed elsewhere, organisations have to rapidly and continuously change in the digital age of business, driving the need for project management.

Outlook for project management services

An increased focus on value over cost – especially in the construction sector – and a forecast increase in the number of international projects are predicted to be key drivers of growth, according to the expert contributors. However, this will not happen in the absence of challenges; more than half of organisations expressed concern over the perceived impact of political uncertainty in the UK. Skills and capability shortages were also cited as a potential barrier by a third of organisations.

With regard to budgets, meanwhile, a third of those surveyed by PwC said they expect the size of project budgets will increase in the coming three years, while 40% anticipate a growth in project size. As the profession continues to mature, and as the recognition of the importance of good project management grows, it is expected that a greater proportion of project work will gain more distinct attribution to the profession itself, giving more recognition and appreciation to the role of the project manager.

Speaking on the findings of the study, Sandie Grimshaw, a Partner at PwC, concluded, “The project management profession is relatively new compared to some other professions, such as lawyers, teachers and doctors. However, as project management is a core competence vital to organisations in the UK, the profession is critical and will continue to grow in stature.”