Monthly Archives: January 2014

A Major Disruption to Supply Chains Occurs Every Day – Is Yours Ready?

In 2013, Resilinc, a provider of supply chain resiliency soutions, reported 355 major Event Notifications that significantly impacted all supply chains that were in the vicinity of, or connected to, the event, which included natural disasters (hurricanes, floods, earthquakes, volcanic eruptions, tornado, extreme weather, and other force majuere events), man-made disasters (factory fires/explosions, power outages/shortages, factory shut-downs, chemical spills, etc.), extreme economic events (labour strikes, bankruptcies, port disruptions, levying of major fines, etc.), geopolitical events (acquisitions, rioting, FDA actions, etc.), and recalls, to name a few. Some of these events, such as bankruptcies, were localized to a few dozen companies that depended on the supplier that went bankrupt, but others, such as the Solomon Islands earthquake and tsunami off the coast of Japan or the Haiyan Typhoon in the Philippines (that wiped out a number of coastal cities) affected thousands of sites and the tens of thousands of supply chains that depended on the suppliers that had factories, warehouses, and/or other operations at those sites.

The impact of these events on their respective supply chains ranged from tens of thousands of dollars to hundreds of millions. If a factory that produces a critical single-sourced component for your most profitable product line is destroyed, the costs associated with finding a new source — which include, but are not limited to, manpower costs, premium production costs, premium raw material costs, downtime costs, lost customer costs, etc. — add up quickly and can easily run into the tens of millions for large high tech, equipment manufacturing, aerospace, and automotive companies.

But if your company is prepared, most of these costs can be mitigated. How do you prepare? You make the right investments in supply chain resiliency. To find out how to get support from the C-Suite for these investments, tune into this Wednesday’s webcast on Justifying Investments in Supply Chain Resiliency in 2014, sponsored by Sourcing Innovation and Resilinc.

Top 12 Challenges Facing India in the Decades Ahead – 10 – China

China is currently everything India is not. While India is the land of contradictions, China is the land of conformity. While India is an infrastructure nightmare, China, which is already decades ahead of India in infrastructure, is investing heavily, building rapidly, and getting even further ahead. While India is in a perpetual state of energy crisis, the energy sector in China, where the government can effectively control the 11 companies that used to compose the State Power Corporation (SPC), is stable and increasing energy production year over year to meet the needs of its population which make it the world’s second largest electricity consumer after the United States. (In 2011, annual power generation was 4693 TWh, which was over five times the power generation in India that peaked at about 877 MWh.)

But it’s not just infrastructure and energy that China has the lead on. It’s just about everything else too. As per a recent NYT (New York Times) article on Why India Trails China, India has an even bigger problem. In particular, it’s the ever-increasing gap between India and China in the provision of essential public services. And while inequality is high in China (as the 1% control 70% of the country’s wealth, compared to the US where the 1% only control 35% of the country’s wealth), China has done far more than India to raise life expectancy, expand general education, and secure basic health care for its people. Plus, literacy in China significantly exceeds literacy in India at 95% vs 74% in India. While India has elite schools of varying degrees of excellence for the privileged, among all Indians 7 or older, nearly one in every five males and one in every three females are illiterate. And while China devotes 2.7% of its GDP to government spending on health care, India allots a mere 1.2%. (That’s probably why China has a much lower child mortality rate that is less than one third of India’s. See A View from the East.)

In terms of business, China is ahead of India in many respects. China exports goods almost twice as fast, registers property more than twice as fast, and business start-up times are almost 33% faster! (See: IndianEconomy.org) Despite being a democracy, India is less politically stable and more corrupt. (See: Interlink India) And the proof is in the GDP pudding. In 1995, when India represented only 3% of world GDP, China represented 6% of world GDP, and in 2010 when India was still only at 5% of world GDP, China was at 14%. (See: The India Site) And while India is expected to increase its GDP by a mere 4.4% next year, China is still on track to increase its GDP by 7%.

Infrastructure. Public Well Being. GDP. While just a few measures of global influence, they are a few important measures and China is leading on every single one. That’s why China is projected to have almost a quarter of the Global GDP in 2025 (by The Conference Board), more than triple what it had in 2000, while India is projected to have a mere 8%, only double what it had in 2000. If India wants to achieve its destiny of being the second most prosperous and influential country on the planet, it will have to at least keep up with China instead of losing ground every day.

10 Years Ago Today Gave Us Proof That Even the Improbable Is Likely

When a decomposing sperm whale spontaneously exploded in the town of Tainan, Taiwan whilst being transported for a postmortem examination. (Source: Wikipedia) The exploding whale splattered blood and whale entrails over surrounding shop fronts, bystanders, and cars. No one was hurt, but likely quite a few people were shocked. Plus the blood and other stuff that blew out on the road was disgusting, and the smell was really awful.

This just goes to show that no matter how unlikely a disruptive event is in the context of your supply chain, it could still happen and you should be prepared when it does.

If The Degree Is Doomed, So Is America!

The HBR blog has a lot of thought-provoking content, which is good, but also has a lot of philosophical content which, if misunderstood, or interpreted as more than a thought-experiment, could lead to very, very bad consequences. Take the recent post on The Degree is Doomed by Michael Stanton which ends with the value of a college degree has been in question since the Great Recession, but there have yet to emerge clear alternatives for the public to rally the around. There are plenty of contenders, though, and it won’t be long before one of them crystalizes the idea for the masses that the traditional degree is increasingly irrelevant in a world with immediate access to evaluative information.

Anyone who takes this literally, including the idiot software CEO I spoke with recently [who] said he avoids job candidates with advanced software engineering degrees mentioned in the post, is setting themselves, and the rest of us, up for massive failure. While I will be the first to admit that there are lots of relatively useless degrees in Academia from an industry perspective, not all degrees are useless and the mandate of a University is not to train you for a job — it’s to prepare you to think critically, solve problems, and improve yourself. This, in turn, allows you to learn the specific skills required for a job related to your field of study quickly and easily.

But this isn’t the point I want to make in this post. And while I agree with the author that the value of paper degrees lies in a common agreement to accept them as a proxy for competence and status, and that agreement is less rock solid than the higher education
establishment would like to believe as many want to promise you a job in return for the considerable amount of dollars you need to fork over to get your degree, this doesn’t mean that the following notions presented in the post are true:

  1. On sites such as GitHub, user profiles contain work samples and provide community generated indicators of status and skill,
  2. Employers have never before had such easy access to specific and current information pertaining to a candidates’ potential, and
  3. The traditional degree is increasingly irrelevant in a world with immediate access to evaluative information.

SI has to disagree with all of these statements. Let’s take them one by one.

  1. Code samples a candidate presents to you through an online portfolio are not necessarily indicative of status and skill. The code samples could be someone else’s, stolen or paid for. The quality of the code could be the result of pure luck. I’ve seen developers struggle with a problem, copy fragments of code from various projects, and, through a lack of understanding of the depth of the problem, end up with a quick and dirty solution that just happens to work well in the real world, like Quicksort, due to the peculiarities of the data set. (Quicksort’s average performance as a sorting algorithm is on the same order of magnitude as its best case performance but it’s worst case is exponentially slower than it’s best case, compared to a merge or heap sort with a worst case that is essentially no worse than its best case.) And even if the code is the candidate’s and the quality is not due to pure luck, it could be based on someone else’s understanding of the problem. (A big part of development is problem solving — it’s much easier to translate an algorithm into code than to come up with one.) Plus, a single person can only do so much so there is no way to tell if the person can function well in large software projects or has the background to architect for such projects. And, to use a real-world metaphor that everyone understands, just because you can put up a shed using a do-it-yourself kit, doesn’t mean you can build an apartment building. Just because you can code a little utility library doesn’t mean you have what it takes to write scalable, reliable, adaptable, and responsive Enterprise Software.
  2. A few specific pieces of work product do not paint a full picture of a candidate’s potential. For starters, in addition to being able to create a good work product, a candidate has to work well with others, adapt to changing job requirements, learn on the job, and create new and different work products from the one he has already produced. A few static pieces of content are nowhere near sufficient to judge whether or not the candidate has anywhere close to the IQ and EQ that you need.
  3. Given our comments to 1 and 2 above, at the present time, the traditional degree is becoming increasingly relevant in a world with too much access to incomplete, non-illuminative, and unverifiable information. Provided it’s an accredited degree from an accredited institution known for high standards, it’s often the only way to judge if a candidate possesses the basic knowledge, skills, and EQ foundation that she will need to excel on the job today and tomorrow. While it is generally the case that an academic program will not teach a candidate everything she needs to know to do your job, it is the only program that will give her the foundation she needs to learn what she needs to know to do your job. You might have to give her some training, but you can be confident with the right training, she will get the job done.

I know Aerosmith told us to Dream On, but I really don’t think what the author presented in the HBR blog post is what they meant. 😉

The Entanglements of e-Auctions

Not too long ago, Procurement Leaders (PL) published a piece on the pitfalls of procurement auctions that did a good job of exposing some of the traps in Procurement Auctions. It is worth a read, but it missed a few entanglements that also need to be understood in order to determine when, where, and why an auction should, or should not, be used. In this post, after reviewing the traps of the PL piece, we will discuss some of those.

According to the piece, there are four main traps of Procurement Auctions:

  • lack of auction knowledge
    The author notes that many business have a pre-conceived notion of what an auction is, even though the concept is very broad and flexible and can be adapted to your business needs. Modern e-Auction platforms support upwards of ten types of auctions, many of which are described in the e-Auction WikiPaper the doctor co-authored years ago.
  • lack of an appropriate platform
    As a result of lack of knowledge, many Procurement teams will lock in with an e-Auction provider before understanding what they really need and settle on a platform that, while great, isn’t right for them.
  • lack of supplier interest
    Auctions don’t work unless you have enough suppliers who can meet your needs who are seriously interested in winning your business. This will generally only be the case only if there are multiple suppliers who can supply the good or service you need (that are not locked in non-compete agreements with your competition that would exclude you) that see your auction process as fair, transparent, and efficient.
  • lack of planning
    As noted above, there is no auction type or platform that is “one-size-fits-all” so you need to select an approach that is flexible and you need it to be repeatable when you need to run the auction on the category, or a similar category, again in the future.

These are big traps, but not the only ones. Four more traps include:

  • lack of market knowledge
    Auctions generally work well when supply exceeds demand and generally work poorly when demand exceeds supply. A buyer who runs an auction at the wrong time will generally not get good results.
  • lack of supply market knowledge
    Just because a supplier is interested in bidding doesn’t mean it should be allowed to bid. Only qualified suppliers that have been confirmed to have the necessary capabilities should be allowed to bid. Otherwise, an unqualified supplier could win the business or suppliers, seemingly separate but in league, could collude to keep prices high. (Do you really know what goes on overseas?)
  • lack of e-Sourcing expertise
    Auction’s don’t have to be stand-alone events. They can succeed RFxs and they can preceed decision optimization. They can include real-time optimization and rules for sole-source awards, split-awards, baskets, etc. The right knowledge can not only lead to the selection of the right type of auction, but an auction that complements the overall sourcing cycle.
  • lack of perceived trust
    As per this article on the potential pitfalls of e-Auctions over on the MIT Sloan Management Review, suppliers often see open-bid auctions negatively. They believe that the buyer is using an open-bid auction to unfairly force prices down through the inclusion of unqualified suppliers or fake bids.

Don’t be afraid of e-Auctions – they work great when used appropriately. Just don’t rush in until you do your planning.