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2017

PricewaterhouseCoopers says it takes “full responsibility” for the mistakes and “breaches of established protocols” that led to the movie “La La Land” mistakenly being named best picture at the Academy Awards ceremony last Sunday night—instead of the actual honoree, “Moonlight.” In a statement released yesterday, the accounting firm confirmed that one of its accountants mistakenly handed the back-up envelope for “Actress in a Leading Role” instead of the envelope for “Best Picture” to presenters Warren Beatty and Faye Dunaway. Some analysts speculate the firm’s reputation was temporarily damaged, however its long-term reputation and brand loyalty among its corporate clients may remain intact because the firm responded quickly, was honest about the mistake and took responsibility.

 

PwC’s response reminds me of the results from a recent Weber Shandwick survey conducted with KRC Research. In the report about the survey, “The Company behind the Brand II: In Goodness We Trust,” the authors explain that the survey respondents indicated they form opinions about companies through not just what customers say about them (cited by 88 percent of the respondents), but also concerning how companies react in times of crisis (cited by 85 percent of the respondents). The finding that company responsiveness is so important is a critical shift in reputation-building that should be addressed by all companies, large or small, the report authors observe.

 

I was also interested to read that 36 percent of the survey’s respondents said they have discussions with others or share information about corporate scandals or wrongdoings, and said they believe the manner in which a company responds to an issue or crisis clearly impacts its integrity, credibility and trustworthiness. In fact, responsiveness to issues and crises is more important in driving perceptions of a company than what the media says (say 76 percent of the respondents), what employees say (cited by 76 percent of the respondents) and what the company says about itself—whether that is on its website (68 percent), what its leaders say (61 percent) or what exists in its advertising (61 percent).

 

It's imperative then for companies to ensure they have a crisis management plan in place so they are able to respond to a crisis appropriately and protect their reputation. Indeed, Rhoda Woo, Managing Director, Crisis Management Solutions at Deloitte & Touche, says crisis management has become a critical capability for handling major reputation problems. That’s because an effective crisis management approach helps companies stay ahead of growing threats that have the potential to undermine their business, she says. It begins with identifying and preparing for strategic risks and includes a broad portfolio of capabilities such as simulation, monitoring, risk sensing, response and communications. Risk sensing is especially important because it can help a company identify emerging problems while there is still time to head them off. Nonetheless, Woo explains that all the capabilities need to be in place before a crisis hits because the absolute worst time to develop a crisis management strategy is during the crisis as a company runs out of options.

 

What are your thoughts concerning reputation risk management? Does your organization have a plan to manage reputation risk which includes simulation, monitoring, risk sensing, response and communications? Finally, should La La Land have won the Oscar for Best Picture?

The threat of ransomware attacks continues to grow quickly and their impact on businesses can be significant. For example, Intermedia’s 2016 Crypto-Ransomware Report notes that 72 percent of infected business users could not access their data for at least two days following a ransomware attack, and 32 percent of the businesses lost access for five days or more. Consequently, companies can expect significant data recovery costs, reduced customer satisfaction, missed deadlines and lost sales.

 

Ransomware essentially accesses and locks a system or encrypt data and files by generating a private/public pair of keys. The data are impossible to decrypt until the victim pays a “ransom” to unlock the system or files. Unfortunately, in many cases, even once the ransom has been paid, the attackers refuse to provide the decryption key, leaving victims without their money and their data.

 

The question then becomes: What can a company do to protect itself against ransomware attacks? A recent CFO article suggests that since CFOs are becoming more involved in driving IT decisions—such as the purchase of hybrid cloud and disaster recovery solutions that protect brand reputation—they must communicate regularly with CIOs. Regular meetings should examine IT risks, discuss ways to mitigate the risks and evaluate if the CIO has adequate resources. The team should determine if the business can continue to grow and scale while maintaining compliance, and ensure that disaster recovery and hybrid cloud strategies are relevant and effective, the article suggests.

 

Disaster recovery, in particular, requires constant evaluation. As companies revise their disaster recovery plans and evaluate existing technology or acquiring new technology, team members should ask a number of questions, the article continues. For instance, they should consider whether or not the organization can recover a point-in-time just seconds before an IT outage occurs so it may get critical data, applications, websites and individual files operational within minutes. Team members should also evaluate whether the organization is able to successfully and quickly run disaster recovery tests with a high degree of automation, or determine if such activity require long lead times, a large support team or expensive consultant resources. It’s also important to ask if the company’s existing infrastructure and disaster recovery technology stack provides the necessary flexibility to achieve continuous data protection with block-level replication and enterprise-class scalability.

 

It’s also worth noting that the Federal Bureau of Investigation (FBI) has also published its own guidelines for preventing ransomware attacks. The FBI recommends making sure employees are aware of ransomware and of their roles in protecting the organization’s data; ensuring antivirus and anti-malware solutions are set to automatically update and conduct regular scans; and managing the use of privileged accounts—no users should be assigned administrative access unless absolutely needed, and only use administrator accounts when necessary. The FBI also recommends disabling macro scripts from office files transmitted via e-mail; configuring access controls, including file, directory and network share permissions appropriately; and implementing software restriction policies or other controls to prevent programs from executing from common ransomware locations—such as temporary folders supporting popular Internet browsers, compression/decompression programs.

 

Is your organization taking steps to safeguard against ransomware attacks or be prepared to resume business quickly? What about key suppliers? What impact would their inability to access data or files for several days have on the rest of the supply chain?

Amazon significantly expanded its army of warehouse robots over the past few years, and its use of robotics is poised to grow dramatically. Such growth may, in turn, spur other companies to invest in robotics as well.

 

It has been widely estimated, and reported recently by The Seattle Times, that Amazon has been adding about 15,000 robots year-on-year. At the end of 2014, Amazon said it had 15,000 robots operating across 10 warehouses. In 2015, that number rose to 30,000, and now Amazon employs 45,000 robots along with 230,000 people, the article reports.

 

The company uses several types of robots in its warehouses, including large robotic arms capable of moving large pallets of Amazon inventory. However, Amazon is perhaps best known for its use of Kiva robots that automate the picking and packing process at large warehouses to dramatically boost efficiency. The 16-inch tall robots can run at five mph and carry shelves weighing up to 750 pounds filled with bins of inventory. The shelves are delivered to human pickers waiting for the inventory.

 

Amazon bought robotics firm Kiva Systems in 2012 for $775 million. At the time, Phil Hardin, Amazon’s director of investor relations, said the move is “a bit of an investment that has implications” for a lot of elements of the company’s cost structure, but the company is “happy with Kiva.”

 

“It’s been a great innovation for us, and we think it makes the warehouse jobs better, and we think it makes our warehouses more productive,” Hardin said.

 

Amazon was also recently granted a patent for a warehouse robot that would pack boxes full of items. NBC News reports that one scenario detailed in the patent filing explains how a “human operator loads the tray with an inventory item,” such as a coffee mug. The item is grasped by a robotic arm using suction, and is “moved into the appropriate box from a group of boxes that are awaiting ordered items for shipment to customers,” according to the patent filing.

 

Interestingly, earlier this year, Amazon announced it will create another 100,000 full-time, full-benefit positions over the next year and a half. Jeff Bezos, Amazon Founder and CEO, said in a statement that most of the new jobs will come in Amazon’s customer service network, fulfillment centers and other facilities in local communities throughout the country as part of the company’s continued focus on innovation.

 

Currently, it is estimated that it takes about a minute or so for a human warehouse worker to fulfill an order, which includes wrapping the item, placing it in a box, taping it up and sending it off for shipping. Conceivably, robots may one day be able to reduce that time significantly, and eventually be much cheaper than their human counterparts, so one must wonder if the humans in Amazon’s warehouses will work alongside robots or be replaced by them.

 

In the meantime, Amazon isn’t the only company investing in the use of robotics. The 2016 MHI Annual Industry Report, developed in collaboration with Deloitte, found more than half (51 percent) of supply chain and logistics professionals believe robotics and automation will provide a competitive advantage. That’s up from 39 percent of the respondents the previous year. Although only 35 percent of the respondents indicated their company has already adopted robotics, 74 percent of the respondents said their company plans to do so within the next 10 years.

 

What are your thoughts about the use of robotics? Has your company, or others in the supply chain, adopted robotics? Finally, if use of robotics does become prevalent, what new jobs will it create for humans?

 

Some business leaders believe that dedicating resources to supplier diversity programs will divert attention from other strategic activities, however new research shows that is not the case. Indeed, virtually all diversity suppliers meet or exceed expectations, and top corporate performers in supplier diversity experience no loss in efficiency, according to new research from The Hackett Group. What’s more, the researchers found that these companies see improved quality and often gain other benefits as well.

 

The Hackett Group’s research found that, to “truly unlock the full potential benefits of supplier diversity efforts,” executives cannot simply focus on improving the corporate image in the marketplace and complying with regulations. Instead, they should look beyond basic measures such as the percentage of spend with diverse suppliers and calculate the true value of supplier diversity by using performance metrics that are aligned to long- and short-term plans and objectives, the group recommends.

 

Companies with top-performing supplier diversity programs focus on several areas to make the most of their efforts, and go beyond the basics, the research found. For instance, they develop supplier partnerships, mentor local suppliers, collaborate with suppliers on product innovation, and share their experiences with other companies. They also use supplier diversity as a reputation-builder to help increase market share and retain talent, and rely on social media to develop customer and brand awareness. Finally, they actively educate internal stakeholders on the value of supplier diversity, and interact with local communities of suppliers and consumers to better understand the market, establish relationships, and share supplier diversity goals, the researchers found.

 

While most supplier diversity programs have a domestic focus, The Hackett Group’s research found that more than 40 percent of all global companies with a U.S. supplier diversity program plan to expand globally within the next two to three years. The firm recommends that companies manage U.S. and global programs as a single initiative, where appropriate.

 

“Supplier diversity is evolving from a ‘check-the-box’ corporate social responsibility requirement to a strategic enabler providing access to innovative products and increased market share in new and developing communities,” says Laura Gibbons, research director at The Hackett Group. “Top-performing organizations are taking advantage of this opportunity, and applying the tenets of social diversity to new areas such as supplier partnering, reputation management and global expansion with exceptional results.”

 

Nonetheless, Gibbons notes that challenges clearly remain. For example, some business leaders worry that dedicating resources to diversity requirements will impact procurement savings or even quality, but the firm’s research shows that this is not true, she adds. Top performers aren’t seeing losses in efficiency, and quality often improves. Overall, the risks to focusing on supplier diversity are quite low, and the potential upside is significant, she explains.

 

“In fact, up to 10 percent of sales come with supplier diversity requirements, suggesting that the lack of such a program can even result in lost revenue,” Gibbons says.

 

What are your thoughts on supplier diversity? Secondly, does your company have a diverse supplier requirement in every country where it operates?

 

Ford Motor Company announced last week it will invest $1 billion over the next five years in Argo AI, an artificial intelligence company. The investment enables Ford to combine its autonomous vehicle development efforts with Argo AI’s robotics experience and startup speed on AI software to develop a virtual driver system for Ford’s autonomous vehicle to be available in 2021, the company explains. The technology—potentially—could also be licensed to other companies and sectors looking for autonomous capability in the future.

 

Founded by former Google and Uber leaders, Argo AI will include roboticists and engineers working inside and outside of Ford. The team of experts in robotics and AI is led by Argo AI founders Bryan Salesky, company CEO, and Peter Rander, company COO. Both are alumni of Carnegie Mellon National Robotics Engineering Center and former leaders on the self-driving car teams of Google and Uber, respectively.

 

The next decade will be defined by the automation of the automobile, and autonomous vehicles will have a “significant impact on society,” says Ford President and CEO Mark Fields.

 

The current team developing Ford’s virtual driver system—the machine-learning software that acts as the so-called “brain” of autonomous vehicles—will be combined with the team from Argo AI to deliver the virtual driver system for Ford’s SAE level 4 self-driving vehicles. Ford will continue to lead on development of its purpose-built autonomous vehicle hardware platform, as well as on systems integration, manufacturing, exterior and interior design, and regulatory policy management. Argo AI will work with Ford’s autonomous vehicle software development effort to strengthen the commercialization of self-driving vehicles. Fields explains that Argo AI’s agility and Ford’s scale uniquely combine the benefits of a technology startup with the experience and discipline of the automaker’s autonomous vehicle development program.

 

“We’re at an inflection point in using AI in a wide range of applications, and the successful deployment of self-driving cars will fundamentally change how people and goods move,” says Salesky. “We’re energized by Ford’s commitment and vision for the future of mobility, and believe this partnership will enable self-driving cars to be commercialized and deployed at scale to extend affordable mobility to all.”

 

Then again, Ford isn’t the only company investing in AI, however. In December, Uber announced plans to buy AI group Geometric Intelligence to form the core of the ride-sharing company’s own AI research center.

 

“Uber is in the business of using technology to move people and things in the real world,” Jeff Holden, chief product officer at Uber, wrote in a blog post. “With all of its complexity and uncertainty, negotiating the real world is a high-order intelligence problem. It manifests in myriad ways, from determining an optimal route, to computing when your car or UberEats order will arrive, to matching riders for UberPool. It extends to teaching a self-driven machine to safely and autonomously navigate the world, whether it’s a car on the roads, an aircraft through busy airspace or new types of robotic devices.”

 

What are your thoughts on the use of AI in autonomous vehicles? Will it be a springboard for use in other industries?

The American Transportation Research Institute (ATRI) released its annual list of the most congested bottlenecks for trucks in America, and the results aren’t surprising to anyone who travels those roads. For the second straight year, Atlanta’s “Spaghetti Junction,” the intersection of Interstates 285 and 85 North is the most congested freight bottleneck in the country.

 

ATRI has—since 2002—collected and processed truck GPS data to support the Federal Highway Administration’s Freight Performance Measures (FPM) initiative, a program that monitors and maintains a series of performance measures related to the nation’s truck-based freight transportation system. The 2017 Top Truck Bottleneck List assesses the level of truck-oriented congestion at 250 freight-significant highway locations on the national highway system. The analysis, based on truck GPS data from 600,000+ heavy-duty trucks regarding truck position and speed, uses several customized software applications and analysis methods, along with terabytes of data from trucking operations, to produce a congestion impact ranking for each location.

 

The locations listed in this year’s report represent the top 100 congested locations. After Atlanta, the rest of the Top 10 Truck Bottlenecks are:

  • ·I-95 at State Route 4 in Fort Lee, New Jersey
  • ·I-290 at I-90/94 in Chicago
  • ·I-65 at I-64/71 in Louisville, Kentucky
  • ·I-71 at I-75 in Cincinnati
  • ·SR 60 at SR 57 in Los Angeles
  • ·SR 18 at SR 167 in Auburn, Washington
  • ·I-45 at US 59 in Houston
  • ·I-75 at I-285 North in Atlanta
  • ·I-5 at I-90 in Seattle

 

The information gained from this research may empower decision-making in both the private and public sectors by allowing stakeholders to better understand the severity of congestion and mobility constraints on the U.S. highway transportation system, ATRI explains. This is of particular importance as the U.S. federal government weighs the needs and resources available for transportation funding. On a state and local level, this research may be used for better decision making about local investment decisions which may directly improve supply chain efficiency.

 

“Trucks move 70 percent of the nation’s goods, so knowing where there are kinks and slowdowns in the system is important for motor carriers and our professional drivers, making this analysis a key tool for identifying where and when to route our trucks to avoid congestion,” says Prime Inc. President and CEO Robert Low.

 

Indeed, ATRI has previously estimated that delay associated with weekday traffic congestion on the NHS totaled over 728 million hours in 2014. Applying the 2014 national average operational cost per hour of $68.09 equated to just over $49.6 billion in increased operational costs to the trucking industry. ATRI notes that spreading this cost evenly across the 10.9 million registered large trucks in the U.S. results in an increased average cost per truck of $4,546, however, the actual cost for any one truck is dependent on a variety of factors, such as location of operation, number of miles driven and operating sector.

 

“With President Trump expected to press for significant long-term infrastructure spending, this analysis should be a key guide for deciding which projects are worthy of funding,” says American Trucking Associations President Chris Spear. “Ensuring the safe and efficient movement of goods should be a national priority, and this report draws attention to the places where our highway network needs improvement to meet that goal.”

 

What are your thoughts on either the congestion spots themselves or being able to plan routes that avoid such spots?

The rule requiring companies to disclose any “conflict minerals” mined in the Democratic Republic of the Congo that are in their supply chains may soon be in jeopardy. The minerals, including gold ore, diamonds, tin, tungsten and coltan, are widely used in jewelry, as well as smartphones, laptops and other electronics. The problem is that the minerals are mined in the Democratic Republic of Congo under conditions of armed conflict and human rights abuses.

 

Supporters and human rights activists say such disclosures curb funding to armed groups. On the other hand, business groups opposed to the measure have long contended that following the rule makes it cost prohibitive for companies to trace the source of minerals through the supply chain.

 

Changes may be coming soon because the Trump Administration is considering executive action targeting the 2010 Dodd-Frank law, say sources familiar with the administration’s thinking, a Reuters article reports. Reuters could not learn precisely when the directive would be issued or what the final version would say. However, a leaked draft that has been floating around Washington and was seen by Reuters last week calls for the rule to be temporarily suspended for two years. Reuters could not independently verify the authenticity of the document.

 

Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act 2010, which was passed in 2010 under the administration of Barack Obama, requires American companies to disclose whether any of the minerals used in their products were mined in Congo. The law explicitly gives the president authority to order the U.S. Securities and Exchange Commission (SEC) to temporarily suspend or revise the rule for two years if it is in the national security interest of the United States.

 

A draft of Trump’s executive order acquired by The Guardian calls for a two-year suspension for part of the law, saying that while it has helped discourage some American companies from purchasing materials in the region, it has also had “both positive and negative unintended consequences,” including “some job loss,” The Guardian reports. The order cites the SEC’s 2014 estimation that it would cost U.S. companies up to $4 billion in initial costs to comply with the order, on top of around $200 million per year after that.

 

If the draft executive order were passed, it would be a “gift for companies wanting to do business with the criminal and the corrupt,” Global Witness, an NGO which investigates the role of minerals in eastern Congo’s conflict, said in a statement last week.

 

“This law helps stop U.S. companies funding conflict and human rights abuses in the Democratic Republic of Congo and surrounding countries,” said Carly Oboth, policy adviser at Global Witness. “Responsible business practices are starting to spread in eastern Congo. This action could reverse that progress and benefit secretive and corrupt business practices.”

 

In The Guardian article, Oboth further says that it is an “abuse of power” that the Trump Administration is claiming that the law should be suspended through a national security exemption intended for emergency purposes.

 

Both the Reuters and Guardian articles note that, perhaps anticipating considerable opposition from human rights groups, the draft order says it will replace the regulatory efforts of Dodd-Frank with a new plan. The order gives the Secretary of State and the Secretary of the Treasury 180 days to propose a plan to “more effectively” address human rights violations and the funding of armed groups in the Democratic Republic of Congo and adjoining countries.

 

What are your thoughts about tracing minerals throughout the supply chain? Do you think the cost is too prohibitive? Should it be done regardless of the cost?

In the U.S., 46 percent of employers have difficulty filling jobs, and nearly a quarter of the companies say they cannot fill jobs due to a lack of available applicants, according to a new survey.

 

ManpowerGroup surveyed more than 2,200 hiring managers in the U.S. for its 11th Annual Talent Shortage Survey. The results are tallied up in the firm’s “2016/2017 U.S. Talent Shortage Survey” report. Laborers, engineers and technicians are all cited as difficult jobs to fill. Interestingly, engineers have consistently been reported as one of the most difficult jobs to fill in the U.S., appearing on the list for 10 of the past 11 years. Technicians, according to survey respondents, were slightly easier to find last year but were still listed in the 10 most difficult to fill jobs.

 

I was more interested, however, to learn how companies are addressing the skilled talent shortage. As the shortage escalates and demand for talent intensifies, many employers are looking inside their own organizations for solutions, with nearly half (48 percent) of the survey respondents indicating their company chooses to upskill employees by offering training and development. As the report notes, training and development programs are often an integral part of an employer’s retention strategy. The right development programs can improve employee engagement and, in return, reduce turnover. What’s more, these programs also offer opportunities to up-skill existing employees into new roles, helping companies mitigate talent shortages and provide employees with career advancement opportunities, the report continues.

 

“Low unemployment paired with shorter skills cycles due to the speed of technological change means U.S. employers struggle to fill positions,” says Kip Wright, Senior Vice President of Manpower North America. “We see this particularly in manufacturing, construction, transportation and education. When the talent isn’t available, organizations need to turn to training and develop their own employees—and, in many cases, this means first identifying the skills that will be required in increasingly digital industries, like manufacturing. That’s why we’re working with organizations like the Digital Manufacturing and Design Innovation Institute [DMDII] to map future skills needs and develop tomorrow’s talent.”

 

Some companies have additional strategies as well. For instance, 44 percent of the respondents said their organizations are exploring new talent sources by recruiting outside the talent pool, and 27 percent of the respondents said the company is exploring alternative sourcing strategies as a means to tackle the difficulties they face filling jobs. Other strategies include offering higher salary packages to recruits (cited by 22 percent of the respondents, up from five percent in 2015), and 19 percent of the respondents said their organization offers additional perks and benefits to attract new employees.

 

In another recent survey, more than 80 percent of the respondents said they believe their company will be affected by talent scarcity in 2017. This concern may be driving the increased use of automation and contingent workers, as businesses strive to become more agile and flexible in the changing economy, according to the “2017 Talent Trends Report” from Randstad Sourceright. Based on a survey of 376 HR leaders at companies in 62 countries, the report explains that one-quarter of surveyed businesses have increased the use of automation and robotics in the past 12 months, while one-third are preparing to increase the use of temporary, contract, consultant or freelance workers to account for as much as 30 percent of their workforce.

 

“Global shifts toward automation and a gig economy have caused businesses to change their talent management strategies to maintain a highly agile workforce,” says Rebecca Henderson, CEO, Randstad Sourceright. “This has resulted in an increased use of contingent talent, which not only has improved the agility of companies but also created a number of new opportunities for workers around the world.”

 

What are your thoughts on the skilled talent shortage? Does your company offer training and development to upskill employees?