Monthly Archives: November 2017

Can You Stop Your Event Dead In Its Tracks?

The best laid schemes o’ Mice an’ Men … often go awry. And in the Supply Manager’s world, they often do. And, to be frank, more often than you realize. And sometimes market reality will shift in an instant and continuing a current event could cause considerable loss, and not the significant value that was initially expected.

In this case a Sourcing or Procurement event, even if for a critical product or service needed in a short time frame, will need to be stopped in its tracks. But can you do it? Or will you continue with an auction only to see costs (significantly) increase (if there is no ceiling? Or an RFX only to get no responses at the deadline (with not enough time to try again)? Or a catalog buy for a product that shouldn’t be bought (because excess supply at a non-preferred supplier just resulted in a huge price drop the organization could safely take advantage of)?

And then, even more importantly, the right event will need to be kicked off in its place. An RFX or Auction might need to be replaced with a strategic renegotiation with an incumbent? A catalog buy might need to be replaced with a spot-buy auction to a set of acceptable suppliers with equivalent products? A simple RFX might need to be expanded to a more complex optimization-backed multi-round RFX to take advantage of new entrants shaking up the market. And so on.

But for this to happen, four critical abilities need to be in place.

  1. The ability to detect market shifts that would necessitate a significant change in Sourcing or Procurement strategy.
  2. The ability to determine the appropriate Sourcing or Strategy to shift to.
  3. The ability to quickly terminate an existing event (type).
  4. The ability to structure and launch a replacement event quickly.

1. The ability to detect market shifts.

This requires continuous, real-time, market monitoring which, to be honest, cannot be done without significant software support, and is a proper application of AI in sourcing and procurement. (But this is a subject for another post [series].)

2. The ability to determine the appropriate strategy w.r.t. the shift.

This requires both software support — to extract key details of the shift, summarize it in a meaningful way, and suggest the option(s) likely to be best — and senior buyer wisdom to make the right decision.

3. The ability to quickly terminate an event.

This requires the ability to quickly terminate an event, and do so in a way that will not result in offended suppliers and lawsuit. While not likely possible in the public sector, with proper foresight, and notification, as part of the terms and conditions a supplier must accept to participate, this can happen.

4. The ability to launch a replacement event quickly.

This requires the ability to set up new events quickly, reusing as much information as the current event as possible. This will require great software support (but not necessarily AI).

As you can see, not easy, but sometimes it literally is the difference between a multi-million dollar win, and a multi-million dollar loss.

AI Can Certainly Identify Relevant Case Law, But Can It Predict Judge’s Decisions?

We are all familiar with the use of AI in contract (lifecycle) management to scan contracts, decompose them into clauses, identify the type of clause, index the contract against the clause types, and identify entity and attribute types in those clauses. This is common practice for best-of-breed CLM providers like Icertis and Exari and standalone best-of-breed contract analytic providers like Counselytics and Seal Software.

But not all of these are designed to evaluate a contract, and more precisely, a contract dispute against existing law and case law to determine the likelihood of a ruling in a party’s favour. But that is apparently what the new AI entrants are shooting for.

As per this article in The Globe and Mail, a new AI entrant is offering simulation software that predicts how a court might rule in a given case involving tax law. The software, which takes client details, arguments, previous case law, and current law into account, crunches this, and other inputs, and delivers a simulated judgement claimed to be 90% accurate.

And now the company in question is turning its attention to labour law and hoping to offer a product soon that will offer the same type of predictive accuracy in this legal area. This will obviously be more difficult than tax as there are more grey areas as to what is a violation, but it may be achievable.

But is 90% accuracy enough? That’s 1 in 10 wrong predictions. But maybe it’s enough. If the software predicts that the plaintiff will lose, with 90% or more reliability, a case that could easily cost hundreds of thousands of dollars, and the damages for pleading guilty are less than a million, the right legal strategy would obviously be to seek out a good deal and not risk losing it all in court.

Plus, if both sides of a pending legal battle had access to simulation software that always showed one side losing with significant confidence, then at least one side will always be up for negotiation, and that’s almost always cheaper than a costly court case. Plus, it gets a resolution quicker, and sometimes the biggest cost of a dispute is the lost time.

So while it will never be truly accurate, as you can’t truly predict how a judge will rule in any given situation (as a human interpretation of a grey area can always be different than what might be the typical interpretation), this might just be the software that lawyers, tax accountants, and, soon, HR professionals need to come to their senses and resolve the dispute before wasting time in court.

And if it works in these areas, maybe soon it can ingest global law and treaties and be applied to Procurement disputes …

Sourcing is Full of Secrets …

… and each and every one costs the organization. Sourcing is supposed to be the savings engine that powers the enterprise value engine that relies on enough cost control to maintain the cash flow required by the enterprise.

But achieving savings in souring requires success, and success can only happen if the event is appropriate and appropriately conducted. But, even though many organizations think they know the right way to conduct an RFX, Auction, or other sourcing event, the reality is that they don’t really know the right way. They know the basics, but the basics are never enough.

Why not? Because little mistakes are often made from minute one they add up, costing the organization opportunity with each mis-step. So what are the common mis-steps? There are a number, but the following three are big ones that should never be overlooked.

1. The Specs

Too often the specs provided by the stakeholder are taken as the specs and accepted more-or-less as-is with just a few minor tweaks and clarifications. The problem with this is that the specs are what the stakeholder thinks they need, not what they actually need. Take Engineering — the specs are written to match the component from their favourite supplier. Take Marketing — the specs for an engagement are usually a mirror of those supplied by their favourite agency. And so on. But if Engineering is being tasked to design a new controller, the FPGA doesn’t necessarily need to be the one they’ve used in the past. There might be a better option. And if Marketing needs to get costs down, then they need to consider separating out creative services from production services from material spend, and not request all-in-one proposals. And so on.

2. The Invited Suppliers

Typically, the invited suppliers are, more or less, the same suppliers invited to the last event or the small set of known suppliers in the database. Only for a mostly new category is supplier discovery done, and, typically, these are suppliers in the supplier network, which, of course, is limited to those suppliers the organization have done business with or those suppliers the organization wants to do business with. But these are not always the best suppliers for the stakeholder and/or the organization. And the sourcing team doesn’t do enough discovery to find the potentially best suppliers, and deprives the organization of what could be a new source of value.

3. The RFI

Many sourcing events don’t start with an RFI that focusses on the appropriateness of the supplier before inviting the supplier to submit a bid on a product or service. The stability, sustainability, social responsibility, and support capability of the supplier in the locales the organization does business in should be considered even before the ability to offer the product or service is evaluated.

Get this right, and maybe your events will be more successful and identify greater value as time goes on. And that’s the true purpose of Sourcing: Value, not Savings.

The Big Bad Blockchain is Here … Well Almost … Well, Maybe …

Blockchain, originally developed to support bitcoin (which heralded the digital currency revolution), is being considered, or at least proposed, for a plethora of uses as a result of the continual promise of the Internet of Things (IoT). It’s one of the most hyped, and to be honest, the most over-hyped technologies out there. (As the doctor originally ranted in his initial post on The Big Bad Blockchain back in March, the blockchain has huge potential, but the reality of the blockchain in today’s supply chain is proprietary proposals that are akin to the most “open” supplier networks, which, as we all know, aren’t that open. In fact, one such network is famous for having prisoners, not customers.

But, as the doctor pointed out in We Need BlockChain, But Not for the Reasons You Think, we do need blockchain, and, in particular, a truly open, truly decentralized, truly open blockchain auditable by anyone and everyone (probably operated by a truly global non-profit conglomerate). Because, with that block chain, we could realize the secure transfer of IOUs between multiple supply chain parties. (And that would allow a return to a modern form of barter where supply chain partners could trade debts until they were ready to collect. [After all, one way to hedge currency exchange losses is to trade debts until you can buy or sell in your currency.]

But until we get there (as this is apparently very forward thinking even though trade started with barter), in the meantime there are three very good uses for a proper, open, block chain.

1. Transportation (Cost) Management

All affected parties in a supply can see who has what, when, what charges were applied, when, and how the total landed cost is affected.

2. E-Document Management Between Partners

In addition to the standard fare of purchase orders, acknowledgements, shipping notices, goods receipts, invoices, and payment notices, you also have e-Contracts, e-Agreements, dispute resolution communications, and other documentation critical to regulatory compliance and future lawsuit prevention.

3. Open Innovation Management

Right now we have a lot of crowd-sourcing networks and innovation management platforms where all sorts of parties can post and respond to all sorts of challenges. However, while they have their advantages, they have their disadvantage — in that not everyone wants to give a solution away without some confidence that, if their solution is best, they will get paid and, most importantly, even if it is not, their solution will not be stolen or used without renumeration or, at least, without acknowledgement. But with blockchain, the origin of each submission can be uniquely identified and verified throughout the network, which will help an organization maintain confidence as the ownership of IP can be proven and access can be tracked.

The big bad blockchain is coming, let’s just hope that it the right instantiation of it appears.

Seventy Years Ago Today …

John Bardeen, Walter Brattain, and William Shockley invent the point-contact transistor (when they first observed the effects) and pretty much paved the way for the modern electronics revolution as the transistor is the fundamental building block of modern electronics technology.

As defined by Wikipedia, a transistor is a semiconductor device (with at least three terminals) used to amplify or switch electronic signals and electrical power. A voltage or current applied to one pair of terminals controls the current through another pair of terminals. When they are combined in integrated circuits, as they normally are today, they can create logic gates, and that’s the fundamental building block of modern computers. (The other primary components of an integrated circuit are diodes, resistors, and capacitors.)

Without transistors, we’d still be computing using vacuum tubes using machines that take up entire rooms and only using computers for mathematical calculations. The inventors were truly deserving of their nobel prize.