Monthly Archives: February 2013

2013: Another Year of the Same Old, Same Old? Part III

In Parts I and II we lamented the relative lack of new innovation in the space for the last few years, as most of the big announcements, and innovations, have centered around technologies that were in (initial) development of the first half of the noughts, and usability and applicability (to specific verticals) in particular before noting that we don’t see much new in the way of trends coming this year and that we’re not alone.

In the last two posts, we covered the global trends identified by ChainLink Research in their recently published Big Trends for Business 2013 as well as the business trends companies expect to the capitalize on this year as a result. In the first case, it almost looks like the Mayans were right, the world came to a stop, and then immediately reversed direction as it looks like we’re in for 2012 all over again and in the latter case, the trends are the same trends they should have been capitalizing on last year!

And if this isn’t bad enough, the big issues identified by ChainLink are the same issues we’ve been facing for years. The big issues identified were:

  • Working Capital Management
    There’s a squeeze up and down the chain — customers want to take longer to pay, suppliers want to be paid sooner. Plus, it’s getting harder to support the unprofitable product lines and the customers that cost more than they’re worth — but what, and who, are they?
  • Cost/Pricing
    Costs need to be kept down, more has to be done with less, and customers are continually demanding lower prices while inflation is coming back with a vengeance.
  • Channel Development
    More outlets are needed to sell more product to generate the revenue required for profitability.
  • Skilled Workforce
    Finding, and retaining, a skilled workforce is a critical issue to companies.
  • ChequeBook Under Lock and Key
    Because of the uncertainty, the chequebooks is under lock and key and the company is still hoarding cash instead of spending it.
  • Risk Management
    Seeing disruptions are on the rise, now more than ever, many companies are concerned about what could happen to them.

Add the really sad thing is the underlying reasons we are facing these problems haven’t changed for years either:

  • They still haven’t learned what working capital management is
    Most companies think extending DPO is good working capital management! In fact, a few think that 200 days is just fine! I’m anxious to see what company has this conversation first!
  • They still haven’t figured out that you can’t squeeze blood from a stone or that savings are a thing of the past

    • And that the only path left to success is to focus on value.

  • They’re still afraid of trusting someone to the extent required to truly hand over a sales channel they can’t manage in house.
    If you can’t handle Twitter, you shouldn’t even try.
  • They always cut the training budget first.
    It’s not someone else’s job to train your workforce, it’s yours! And stop putting the blame on the Universities – it’s not a University’s job to train your workforce, it’s a University’s job to introduce someone to higher learning, deeper thought, and intellectual pursuits — not the practical skills you need.
  • They still haven’t figured out uncertainty NEVER goes away.
    There’s always risk, but there’s always opportunity — and, moreover, the opportunity is typically created by someone with the guts to actually do something!
  • They still haven’t even given someone the responsibility of managing risk!
    If it’s not anyone’s responsibility, who’s going to do it? The shoemaker’s elves?

In short, most companies are standing still with the same problem set because they haven’t learned what they need to learn.

2013: Another Year of the Same Old, Same Old? Part II

In part I, we lamented the relative lack of new innovation in the space for the last few years, as most of the big announcements, and innovations, have centered around technologies that were in (initial) development of the first half of the noughts, and usability and applicability (to specific verticals) in particular. (Not to say there hasn’t been any innovation, but there’s a reason vendor coverage has been down the last couple of years. In addition to the fact that there’s been less to cover as the major best-of-breed players get gobbled up the IT gorillas who haven’t caught onto the value of social media and blogs in this space, there just hasn’t been as much to cover.)

Then we noted that we don’t see much new in the way of trends coming this year, and that SI isn’t alone! Reviewing ChainLink Research’s recently published Big Trends for Business 2013, it almost looks like the Mayans were right, the world came to a stop, and then immediately reversed direction as it looks like we’re in for 2012 all over again! The major global trends — slowing in the globalization of trade, china off-shoring, US Insourcing, Small Office Home Office (SOHO), and Local vs. Global don’t sound any different than what we’ve been seeing, hearing, and speaking for the last year (or two to be honest).

What’s even worse is that the business trends companies expect to the capitalize on this year are the same trends they should have been capitalizing on last year!

  • Manufacturing Goes East / Service Goes West
    If you still (have to) manufacture east, then you can at least focus on keeping your (value added) services (support) close to home. And to be honest, how much more does it really cost to have that call center in a small-town in Idaho or Alabama or even Springfield, Illinois or Wichita Falls, Texas where the costs of living are low and there are lots of people who can afford to take entry level positions for not much more than minimum wage? Yes, you can still get three resources for the price of one in some of the more remote locations in India, but when you factor in the long-distance costs, the travel costs for regular on-site visits and training, the ongoing training costs due to the much higher turnover (as poaching is very common and often an employee will go to lunch and not come back because the call center across the street offered him 15% more), and the lower throughput (as it’s always easier for someone from the same culture to understand an upset or confused caller who may use slang or unfamiliar words and resolve the issue sooner), services outsourcing is not as cheap as you think and might actually increase costs compared to a well run on-shore operation.
  • Devicification
    Finding ways to embed more intelligence in your older products to sell important upgrades, and charge more for what you sell. After all, with innovation down across the spectrum in many industries (relatively speaking), you have to milk what you have somehow.
  • Analytics
    More insight into operations and sales to maximize use of resources and potential sales.
  • Investment in Energy Independence / Green Technology
    Energy costs are going to continue to rise, and eventually will cost more than every piece of technology they power – unless we collectively do something about it. That something is moving to low-cost, renewable sources (and low-cost storage technologies that minimize our dependence on coal, oil, and gas and a third-party grid).

In addition, Retail needs to continue to pursue social media channels as sales channels; Life Science needs to continue to focus on better monitoring solutions; Food and Beverage need to focus on ingredient traceability from initial harvest to final consumption; and Packaging needs to focus on safety and security. Nothing new here either. And to top it all off, the big issues identified by ChainLink are the same issues we’ve been facing for years. But we’ll discuss those in Part III.

2013: Another Year of the Same Old, Same Old? Part I

Regular readers will note that I’ve been lamenting the relative lack of new innovation in the space for the last few years. Most of the big announcements, and innovations, have centered around technologies that were in (initial) development in the first half of the noughts, and usability and applicability (to specific verticals) in particular. And most of the hype has centered around Big Data, which isn’t new, Cloud, which is just your provider giving you hands-off ASP, and “spend optimization” which is typically defined as real-time visibility into spend and budgets. All good, but where’s the ground-breaking new technology?

In fact, in the last few months, the only ground-breaking new R&D has centered on allowing players outside of Supply Management, namely Marketing, to manage the value chain. (Ugh. Supply Management is supposed to manage the value chain!) There’s a few companies that have come to my attention as of late that are working on some innovative new offerings that could reshape markets Supply Management should own. (And when they release their products/services, SI will cover them.)

But I guess I shouldn’t be surprised. From a business perspective, I don’t see much new in the way of trends coming this year. And I’m not alone. ChainLink Research recently published their Big Trends for Business 2013, and it looks like we’re in for 2012 all over again.
Maybe the Mayans were right, the world came to a halt, and now we’re moving backwards. Seriously. Consider these global trends:

  • Slowing in the Globalization of Trade
    This started 2 years ago, and will continue throughout the decade. There are a few reasons for this, including the emergence of what were once “low-cost countries”; the continued rise in the cost of oil and, as a result, transportation; and the move towards protectionist policies in a few major first world players, and the U.S. in particular with its “Buy American” movement.
  • China Off-Shoring
    As emerging economies become emerged economies, they pick up our (bad) habits and find even poorer countries to outsource to.
  • US Insourcing
    As a direct result of the slowing of the globalization of trade, Buy American policies, economic stimulus policies, consumer backlash against foreign products, and rising costs of outsourcing for mid-sized businesses.
  • Small Office Home Office
    For some, it’s the new American Dream to be your own boss, for others they have no choice as they can’t secure (the) full time work (they want), and for others still it is forced upon them by their employer that doesn’t want the overhead of a large office.
  • Local vs. Global
    The 60’s saw the hippies protesting the war and lack of equal rights, the 80’s (dubbed the “me” generation) saw the yuppies concerned with the lack of personal wealth and ways to achieve the American dream before retirement age, and now that we’ve seen the result is unrelenting greed, which has delivered nothing but one economic disaster after another, we’re coming full circle and focussing on the greater good again. However, we learned from the previous generation (or the modern media which has chronicled the hippie movement in various formats) that “peace and love” isn’t enough, that we’re not taking down the governments and the corporations, and that we have to work within the system to help our neighbour. And the answer we have come up with is “Buy Local”.

And as a result of these global trends, we will see a number of secondary trends focussed on by Supply Management and/or Manufacturing organizations this year. These will be discussed in Part II.

Supplier Circles? That’s Just Loopy!

Don’t know how SI missed this, but apparently McKinsey has been telling everyone to abandon supply chains in favour of supply circles for almost a year now! What? While it’s true you can loop a chain to make a circle, it’s not always the case that you should. And, moreover, it’s not really a circle that you want, but a chain where information, inputs, and values flow up and down. Just like you can walk up and down stairs, you can push value up and down the chain.

But we’re getting ahead here. Stepping back, the article from last spring on “Manufacturing Resource Productivity” stated that manufacturers can generate new value, minimize costs, and increase operational stability by focusing on four broad areas: production, product design, value recovery, and supply-circle management. All true, but none of it requires you to manage a supply circle, or even treat the supply network as a circle.

Digging in, we find the article is building on an inforgraphic released at the same time that takes us “from supply chains to supply circles” and explains how companies can respond [to pressures on profit as a result of higher variable costs] by improving resource productivity. Furthermore, it goes on to say that leaders in the field are exploring circular operating models where value is created by looping products, components, and materials into the value chain after they fulfill their utility over the life of a product.

Essentially, the article is saying that you should recycle, refurbish, reuse, and repair — the reduce, reuse, recycle that environmentalists have been preaching for years. The only difference is that they are preaching that this thinking should pervade the supply chain and influence new business models that improve recovery, create new sources of supply, optimize production, and increase revenues and products. Isn’t this just the Design for Recycle that SI and other thought leaders have been preaching for over 6 years?!? (SI’s post is back in 2007!) It is! The only difference is that they are confusing you by saying that you have to circle your supply chain to make it work.

Sorry, bub, but this ain’t the case. As long as you build a recovery mechanism that is usable, and attractive, it doesn’t matter if you have a chain, a loop, a circle, or a figure 8. It’s not the physical design of the chain, but the capability. Maybe the consumers return unwanted / end-of-life products to a recovery centre that breaks your product down into component parts, and returns the working ones to your primary manufacturer and sends the broken ones to a base metals extractor that, in turn, sends the extracted metals to the component manufacturers that feed the primary manufacturer and the waste that it can’t process to a waste processor for further recovery efforts. And maybe the consumers return the produts to the retailer that sends them to you and you repair, or send them to a raw material extractor, as needed. The supply network might end up being circular, might loop back in to the manufacturer, or the return (and recovery) paths might be the exact inverse of the supply paths. The design doesn’t matter — it’s the capability to insure raw material supply and keep variable (and unpredictable) costs down that matters!

Getting a Grip on Multi-Tier Supply Chain Risk – A Resilinc Commentary


Today’s commentary guest post is from Jon Bovit, Chief Marketing Officer of Resilinc, a provider of supply chain resiliency solutions for industries including high-tech, medical devices, and automotive manufacturers. SI recently covered Resilinc in detail in Do You Know What’s At Risk? Resilinc Does! and Will Resilinc Resonate with Your Supply Chain.

Today’s supply chains are complex, global, and highly dependent on
sub-tier suppliers. Long term sustained success of companies is hugely dependent on the resiliency of their suppliers. Despite this, most supply chain leaders are unable to readily access critical supplier information necessary in order to manage business effectively. Supply chain leaders need a solution that maps the global supply chain across multiple tiers, identifies critical supply chain dependencies, exposes critical vulnerabilities and single points of failure, manages risk mitigation across the organization, and optimizes resiliency practices throughout the organization.

Despite popular opinion to the contrary, the harsh reality is that measuring supply chain risk at the supplier, or even the location, level is inadequate for today’s global and complex supply chains. In order to properly managing supply chain risk, a company must start by mapping its global supply chain down to the individual products, parts, sites, and revenue across each of the multiple tiers. Once the multi-tier supply chain is mapped down to the product and part level, with the proper methodology, the company can calculate risk scores based on (multiple measures of) financial risk, location (economic and geopolitical) risk, and recovery risk (recovery time and BCP). By evaluating supply chain elements based on inherent financial, location and recovery risks (which align well with the risks identified in the recent World Economic Forum Global Risks report), supply chain practitioners can choose the most effective mitigation
strategies.

As an example, by utilizing the above methodology, the Resilinc platform is able to quickly identify high risk, high revenue, single sourced parts for a high-revenue producing business unit. The high risk may come from long recovery times from a specific supplier manufacturing site in Malaysia or Japan. The customer can then come up with specific risk mitigations strategies for those specific high risk, high revenue single sourced parts before a disruption occurs, which could save the company millions in losses and unmeasurable damage to its brand. If risk was measured at the supplier level, these details would have been missed completely.

Customers should not only focus on assessing and mapping risks based on their supplier global footprint and site locations, but also should capture sub-contractor and sub-tier supplier dependencies, site activities, part origin, alternate sites, recovery times, emergency
contacts, and business continuity planning (BCP) information. By focusing on identifying critical vulnerabilities and the highest risk exposures using quantitative scores and impact analysis at the product, part, and site level, leaders can direct limited budget and resources into the right areas for optimal protection against future supply chain disruptions.

Thanks, Jon!