Monthly Archives: April 2023

Carbon Tracking is Important — But a Calculator or a Credit is Not A Solution!

We need sustainability. But that’s a heck of a lot more than just calculating the carbon in your supply chain or buying credits from an unknown seller of dubious origin. However, in the last two years, we’ve seen dozens (upon dozens) of startups that, as of now, do just that — and only that.

If they have plans to do more, that’s great, we need more — a lot more, but for now, all they are adding is unnecessary duplication of capability and confusion to a space that needs more clarity.

First of all, you don’t need a custom “carbon calculator” to compute your carbon footprint. All you need is the data on the products you produce — specifically, how many units you buy, the carbon output by the factory on an annual basis, and how many total units it produces. Then, you can compute a carbon contribution by product. (Yes, this is a bit simplified, but you can have the factory track daily production by product and daily output and improve the estimate if you like. It’s still a simple calculation.)

And, most importantly, you can do all of these calculations easily in any Business Intelligence (BI) or Spend Analysis Tool. Just load the factory carbon / GHG output for a day and the number of products produced per day in a tracking table and create a derivation dimension for carbon and each GHG you want to track and that’s your output per product. Then, on your product purchase table you create a derived dimension that calculates how much carbon (and GHG) the products you bought contributed. Dump the table and there’s your report, which you can format how you like.

And you can even do all this work in, gasp, Microsoft Excel if you don’t have a spend analysis tool — you don’t need someone to build a custom mini spreadsheet tool to do this for you (or pay for it).

But even worse is an unregulated someone who will take your money and invest it in “carbon offsets” for you. Especially when the enterprises that someone invests it in may or may not be doing anything that’s actually reducing the amount of carbon in the atmosphere. The reality is that, today, many “carbon offset” investments are a complete and utter scam, as per this John Oliver segment, and many more that look like they are doing activities that will capture atmospheric carbon are just wasting time and money. For example, just planting a tree does nothing if the tree doesn’t survive. In many areas of South America and other locales undergoing rapid deforestation, especially where droughts are common, the climate quickly becomes similar to that of a semi-desert part of the year — and a young sapling in this climate generally won’t survive without irrigation. Also, if the entity doing the planting decides to plant a non-native species of tree that they believe should “grow faster”, chances are those trees won’t survive the climate either.

What we really need is a few internationally regulated organizations that create requirements and standards for an operation to be a real carbon offset operation and auditing requirements that must be met in order for an operation to be certified as being a true carbon offset operation — before it takes a dime of your money. Otherwise, yet another organization just wanting to do good is NOT enough.

And then, we need these companies that care to take the next step and provide meaningful guidance to global enterprises as to the steps these global enterprise clients can take to reduce their carbon footprint — technologies they, and their suppliers, can invest in to reduce carbon and GHG production, alternative raw materials and components they can use in their designs that produce less carbon in their mining and production, and ways to reduce consumer demand for carbon intensive products. (Which, by the way, doesn’t have to reduce profit — conscientious customers will pay more for sustainable products, especially if those products now last longer as a result!)

In short, we need actions, not calculations!

Source-to-Pay+ Is Extensive (P6) … But There are Barriers Selecting an e-Procurement Solution!

After sticking through five parts of this series (Part I, Part II,Part III,Part IV, and Part V) you accept that you need to start with e-Procurement, which means getting an e-Procurement foundation in place as soon as possible if you don’t have it or upgrading the e-Procurement foundation if the solution you have now does not meet your baseline requirements. But how do you select the right solution?

After careful consideration, it became quite obvious that e-Procurement was the definitive starting point. It also became quite obvious that no matter how good an argument a vendor gave you for starting elsewhere, it was never the right starting point because all these solutions require data — that the e-Procurement solution collects — and assuming that you could get the full value of their module without that data was a false assumption. (However, if the argument is strong enough, it’s the next module you work on, as soon as possible.) Unfortunately, now that you are ready to select a solution, the answer of what to do next is not so obvious.

Even though we outlined a minimal baseline that is more-or-less an absolute for every organization — small, medium, and large alike — it doesn’t get us anywhere towards selecting a vendor solution, or even identify potential starting vendors, as all the minimal baseline does is allow us to eliminate any solution that doesn’t have core functionality, and, despite vendor claims to the contrary, isn’t yet an enterprise ready e-Procurement solution. So how do you select between what’s left? Especially when this still leaves potentially dozens of solutions that can easily meet your (current) baseline needs.

Well, the answer is a good old-fashioned RFP, but who do you send the RFP too? You don’t want to send it to 20 vendors that seemingly make the baseline based upon their marketing materials and whatever third party write-ups you can find. You want to narrow in to a top 3-5 with the technology to serve your needs as soon as possible, and send the detailed RFPs to them.

If you’re a large company, Spend Matters*1 Solution Map could be a good starting point as that verifies the solutions have certain technical capabilities and you can weight down to the capability level in a detailed assessment project (assuming, of course, you’ve already done a gap analysis and a study to determine the technical foundations that are necessary and relevant to your organization — the must haves and should haves). (And while the Spend Matters Solution Map doesn’t capture every vendor, it captures a majority of those that can serve large multi-nationals.)

If you’re a larger mid-size company, Spend Matters TechMatch may be a good starting point as it is based on Solution Map and allows you to rank vendors by answering questions that encapsulate (related) functional requirements, and you can always verify deep technical requirements where it’s relevant in the RFP. (And while Spend Matters TechMatch doesn’t capture every vendor that can serve a mid-size, primarily regional, organization, it captures more than enough.)

If you’re a smaller company, TechMatch could work, but the reality is that you likely don’t have the budget for it, and/or want to focus in on the smaller, lower-cost, and/or newer solutions to start, of which only a minority are covered at any point in time (due to the baseline capability required for a vendor’s solution to make the maps and the fact that smaller vendors sometimes don’t have anyone to do analyst relations and/or marketing full time). Also, it’s likely that you can’t yet afford half the solutions in the map anyway. (The suites*2 are quite expensive. While the suites are most definitely worth it to a large multinational when you do the ROI calculation, the up front [and even ongoing cost] is sometimes impossible for a smaller organization to justify.)

Moreover, an implicit assumption in SolutionMap is that you’re a typical company in a vertical buying primarily indirect and direct categories that are well covered by the solutions represented in the maps. If this is not the case, or if you need more solutions at the lower end of the market, given that the maps typically only represent around 20 solutions, with the majority of these solutions best suited for the mid-size or large enterprise, the maps may not be for you. (Especially when there are more than twice the number of solutions on the market then are represented on any map.) Moreover, if your company is not a typical company and needs a solution customized for a specific vertical (like Marketing or Legal, etc., where a specific solution would not show well on a general map), the maps won’t work for you in these edge cases.

So where do you look? The big analyst firms? Their reports costs thousands of dollars and tend to cover less vendors. Conference exhibitors? That’s typically limited to the bigger companies with larger marketing budgets given the cost of a booth these days and, thus, no better as a starting point. ProcureTech, that puts out a ranking of 100 companies a year? There’s some really good lower end companies there (and the doctor is impressed with the breadth of companies they have identified), but the ProcuremTech 100 is very broad and their organization of this report, and their companies, ranges from ok to confusing to utterly meaningless for a buyer looking for a specific type of solution! (Growth? Innovation? Customer Satisfaction? How do those categories help a company identify who to look at when they need a specific solution type. And sometimes the solutions within a same general category are so different they are barely comparable. This happens a lot in SXM and CLM, as we will discuss in future series.) You could engage with ProcureTech, as they have a good database now, but the doctor feels you shouldn’t have to do an engagement with anyone just to find a starting list of vendors you might want to look at (that the analyst firm could advise you on) or a basic understanding of how the analyst firm can help you before you engage them — especially if all you want is a set of logos in a specific application area when DPW gives you 100+ of those for free with their latest “Sustainable Procurement Technology Landscape“!

How about Spend Matters Almanac? It’s better than most directories out there as it does include over 575 listings across 61 categories, but that’s still only half the vendors in the global extended procurement technology space. (Presumably because most vendors, like most buyers, probably don’t realize it exists and some of those vendors that are aware of it, but not listed, also assume that most buyers aren’t aware of it and thus don’t want to pay for the attention grabbing premium listings and don’t bother with the Almanac at all — often not realizing there is a free listing option.)

The reality is that there’s no good starting point for even getting a near-complete list of relevant vendors to consider, and then when you have that list, putting together a meaningful RFP — which has to get beyond just basic technology and address the core problems your organization needs to solve. (And the answer here is to NEVER take a vendor RFP template and start from it, because all that has ever been since Procuri came up with the concept 15+ years ago is a feature-function list heavily favoured towards the vendor giving the RFP template away for free — and it’s not how many standalone features the product has, including many you don’t need or won’t use, it’s the business functions that support your business, the technical foundations the platform has to be built on to support those functions, the integration capability with other products and platforms you need to work with and support, the support capability of the vendor for implementation, integration, training, and on-going support, etc.)

In other words, it’s difficult to find the right vendor as it’s difficult to even find a meaningful shortlist to send the RFP to. This shouldn’t be the case, but it sadly is. Not a week goes by when the doctor doesn’t talk to a vendor who tells me that a potential client shortlisted them with a second vendor that no one who knows the space would compare to that first vendor and not a month goes by where the doctor doesn’t get an unsolicited request to identify vendors like “X, Y, and Z” where X, Y, and Z are in completely different S2P categories (but the potential buyer thinks they are all interchangeable).

The situation needs to improve, but the reality is that some vendors are profiting too much off of the status quo, the big analyst firms who depend on big cheques from these big firms don’t have a reason to change the status quo, and the smaller analyst firms don’t have the money or the person power to cover all the vendors they want to.

Hopefully now that a few smaller analyst firms are growing they will start to tackle this core problem, but in the interim, the doctor, who used to maintain one of the original resource sites many (many) years ago, still maintains his own database of over 1200 companies in our space, is now working on updating it (which he tends to do biannually or triannually), and will, over the next few months, publish starting lists of vendors in each of the 10 core areas discussed in this series along with an indication of the market-size(s) they are best suited for so you have a starting reference point. It’s not much, but maybe it will help some of you and provide an incentive for the smaller analyst firms to do more. They need to collectively cut through the noise because every Procurement organization who has a bad experience is another Procurement organization we collectively lose for a few years and another voice that’s not spreading the message of how important modern S2P technology is.

And while this wasn’t the post you were hoping for, as the doctor knows you need help breaking down the internal barriers to new solution acquisition (and you assumed the doctor would be talking about that in this post), this is an unspoken reality that, like an elephant in the room, needs to be addressed.

So, onward to Part VII!

*1 At the time of this writing, the doctor is not a Spend Matters analyst, has not been one for seven (7) months, and receives no benefit from you purchasing any Spend Matters solution. However, he cannot deny it is still the ONLY map on the market that is based on tech and hard, well defined, scales. So he cannot overlook the value of these maps and be fair to you, dear reader. (Compare this to the random mish-mash of soft objective factors that the majority of analyst firm maps are based on where the ultimate ranking is utterly the opinion of the analyst who may or may not fully understand the solutions that are being ranked — and the discrepancy in the results that arise if the analyst firm has multiple analysts ranking vendors on the same, soft, objective scale that is open to interpretation.)

*2 There are advantages to these suites, especially if you are a larger enterprise that can afford them, as the modules are integrated out of the virtual box and the vendor can turn them on with the flick of a software switch, but there are also disadvantages as well. If the best-of-breed solution you want for a particular module or need to solve a particular problem isn’t already integrated, it could be a while to get it integrated, if you can get it integrated at all (as sometimes only “partners” are supported [and allowed] by these vendors). Plus there’s mapping the data models, API calls, etc. — you’re locking into an ecosystem when you select a suite.

Source-to-Pay+ Is Extensive (P5) … Defining an e-Procurement Baseline

In our series to date, we reviewed the primary modules of S2P (Part I and Part II), argued and counter-argued the merits of sourcing and procurement to clarify why e-Procurement must come first (Part III), and then dispelled some of the better counter-arguments we received (Part IV) as to why another module (specifically, Spend Analytics, Supplier [Relationship] Management, or Contract [Lifecycle] Management) should be first, when in fact, it should always be e-Procurement until a baseline is up and running (at which point the organization can begin implementing/using the next module).

Today, we’re going to outline baseline capabilities you should be looking for in an e-Procurement system, as well as explaining why you need them. This is not meant to be a complete list of capabilities you will need (over time), as every organizations’ needs are different, but a starting list that few organizations can do without.

  • e-Request: any user who does not have access to the system should have the ability to create Procurement requests for Procurement to act on; otherwise, they will attempt to bypass the process and the spend won’t be captured in the system
  • Requisitions: users who have the authority to place orders against contracts or budgets should be able to create a requisition for Procurement to review and flip to the appropriate supplier(s)
  • Purchase Order: the system should generate purchase orders in modern e-Doc standards that are automatically delivered to a supplier in their preferred format (to their preferred system)
  • Catalog support: it doesn’t need to have dozens of catalogs integrated out of the box, but the ability for Procurement to integrate the catalogs it needs as well as build in-house catalogs that represent contractual agreements for goods and services that can be selected by users who have system access (the complexity required will be dependent on the organization and whether it’s just standard CPG or direct parts or packaged services or consulting services with rate cards, etc.)
  • Quick-Quote/Quick-Bid/Request-for-Bid: when the organization needs to spot buy something and needs to get multiple quotes to do so (not a full modern, Strategic Sourcing, RFX solution, but simple functionality for bid collection)
  • PO ACK(nowledgement), A(dvance)S(hipping)N(otification), and standard e-Doc support
  • PO-FLIP: to make it easy for suppliers to create invoices
  • e-Invoice Support: accept the invoices
  • Goods/Service Receipt/ACK: extensive inventory support not required
  • m-way Match: the PO should match the invoice should match the receipt at the minimum (and the PO should match the contract, which it will if the catalog was populated with all the goods/services at contracted rates and the PO built off of the catalog)
  • Approvals and OK-to-Pay: support for (multi-level) (parallel) approvals and ok to pay
  • Complete API for Data Import/Export: catalogs need to get in, ok-to-pay, good receipt notifications, etc. need to be pushed out
  • DIY Organizational Administration: that allows them to define org structure, roles, user, access, catalogs, approval chains, and other core capabilities

This is just a core starting list of capabilities, the average organization will need a bit more, and the goal should be to get a system that will allow the organization, and its users, to grow over time, but anything less than this would likely not provide a baseline.

For a deeper dive into what you should be looking for from a user experience perspective, if you have Spend Matters Pro access, check out this classic series the doctor co-authored with Xavier “The Revolutionary” Olivera:

  • The Procure-to-Pay User Experience Part I
  • The Procure-to-Pay User Experience Part II
  • The Procure-to-Pay User Experience Part III
  • The Procure-to-Pay User Experience Part IV

And for those of you who want an advanced “AI” solution, check out this series which is relevant and realistic:

  • AI in Procurement Today Part I: Definitions and 6 Applications in P2P
  • AI in Procurement Today Part II: 6 Applications in P2P
  • AI in Procurement Tomorrow Part I: Recap and Overspend Prevention Examples
  • AI in Procurement Tomorrow Part II: “Ninjabots” and Augmented Intelligence
  • AI in Procurement Tomorrow Part III: Category Wizards Will Save Time, Add Strategic Muscle
  • AI in Procurement: The Day After Tomorrow

On to Part VI!

Source-to-Pay+ Is Extensive (P4) … And No Matter How Great The Arguments Are … It’s e-Procurement First!

Every company is different. Every situation is different. And, as a result, for every 10 organizations, the greatest need in S2P will be different, and for the 10 in 100 organizations where it is the same base need, the specific requirements for the solution needed will be different. That cannot be argued.

But that still doesn’t mean you start with any solution other than e-Procurement first (unless, of course, you have “good enough” e-Procurement, in which case you already started with e-Procurement, and can now move on toward fulfilling the greatest organizational need).

the doctor has had some great conversations around this series (Part I) since it started early last week, and some great minds have brought up some great points, and in each case they have managed to convince the doctor of multiple situations where their solution should be the second to be implemented, but none have convinced the doctor that it shouldn’t be e-Procurement first — because in each case he’s been able to find the one assumption, or flaw, in their argument. (But, in fairness, a few great minds have convinced the doctor that the definition of what the “baseline e-Procurement” capability is for an organization can be even murkier than just industry, high-level spend breakdown, and organizational size … but we’re not going to go into that in this post, and possibly even this series, as it’s not an article, but a treatise, and the point here is to get you on your way and educated enough to figure that out with the right expert advisor, not to drown you in confusing hypotheticals that likely aren’t relevant for your business — although we will overview the typical baseline at some point.)

The three best arguments the doctor received were for

  • Spend Analysis
  • Supplier (Relationship) Management
  • Contract (Lifecycle) Management

We’re going to focus in on these one by one, as they came from great experts who had great points (and who were right in that the “baseline” e-Procurement need could sometimes be weakened as it really is different for every organization, although usually just a small +/- to generally agreed upon core capabilities), and because you should not be lead away from pouring the foundation first (because you can’t build an apartment complex without a solid foundation, or at the very least you can’t build an apartment complex that would stand for very long without a solid foundation!).

Spend Analysis

The argument, summarized: If you don’t cleanse, classify, and homogenize the AP information, how do you know what you need the e-Procurement system for — catalogs, 3/m-way match, payment approval (chains), spot-buy quote capability, etc. — and where the opportunities are.

It’s a valid argument, but the counter point came from the admission that sometimes it takes 3-4 months to locate, access, synthesize, and verify all of the data you need to make this decision, and by the time you finish the analysis, design the implementation plan, and get going with e-Procurement, it’s six months. By that time, because you did not have an e-Procurement system in place, when the baseline is finally implemented three months later, you have to repeat the entire spend analysis process to collect, synthesize, verify, and load the next 9 months of data you didn’t process the first time.

the doctor is a very strong proponent of spend analysis, and you should kick off a project (even without getting a system into the hands of everyone) as soon as it is feasible (and it can be congruent with implementing the e-Procurement system if that is feasible), but any delay in getting a system in place that captures all of the spend just leads to repeated effort and incomplete analyses.

Supplier Relationship Management

The argument, summarized: For most big companies, especially in direct, the majority of the spend, and opportunity, is with (at most) the top 20% of suppliers, and management of the relationship is key to achieving the savings as the product/service has to be quality, on time (without expediting), supported, and invoiced at the agreed upon rates or the value never materializes. Furthermore, e-Procurement should be with those suppliers first, so it’s good to identity them.

This is undeniable. And if you don’t have the right relationships, collaboration, interaction, and management of the core supply base, especially in direct or service-driven industries, it’s true that e-Procurement won’t help you. But what’s overlooked is not having e-Procurement will hurt you. Why?

Here are a few reasons:

  • Not a single individual in any large organization will be able to name even the top 10 suppliers by spend, volume, or criticality. In divisions / categories, the experts/leads might get the top 7 or 8 right, but until all the data is captured and properly analyzed, no one will know definitively.
  • Collaboration and management is good, but you still need to send them the PO, get the ack, get the ASN, get the invoice, confirm the receipt, match and confirm the invoice, approve it, pay it, and, if at any point, something is late, detect it and act on it … that’s e-Procurement!
  • Relationship Management should be based on data … SRM systems only track interactions, not spend data, and, at the end of the day, the CFO and CEO only want to know how the relationship improved the bottom line

Contract Lifecycle Management

the doctor actually received multiple arguments here, which, summarized, were: “It’s an inflationary time, and without contracts with price protection, your costs could be out of control.” “Good contracts are key to ensuring both sides understand their obligations and what is to be delivered when.” “Contracts define what is in the catalogs and/or who the preferred suppliers are.” “Risk is at an all time high, a good contract is the best protection you have.” (And the last one was more extensive, and probably the best, but still not enough. But let’s leave risk to a different series.)

All valid statements, but none override the importance of having an e-Procurement core or address the entire picture. For example:

  • yes, costs are still going up, but they are not going up equally across all spend categories, and if there is sufficient supply available, a simple spot buy in response to a quick bid can keep costs under control, delivering significant value without an extensive (and sometimes expensive) contracting exercise
  • obligations are critical, but you don’t need a CLM to hammer out a good agreement and, in fact, if a solid understanding is key, that education and discussion is going to take place outside of the CLM and the crafting of those responsibilities on (e-)paper done by project leads, not ML-assisted auto-assembly of standard clauses into a contract template
  • you don’t need a contract to integrate a catalog, set preferred suppliers, or set restrictions on who can buy what in an eProcurement system … all of which can be changed as new contracts are negotiated later, and you don’t need a CLM to negotiate the contracts
  • risk is key, but just because you take every contractual step to protect against risk doesn’t mean you won’t have a disruption, that an earthquake won’t destroy the supplier’s plant, that unforeseen embargos will prevent them from fulfilling their responsibilities to you, etc. — you will still need mitigation plans, risk monitoring systems, etc. — and a simple absence of PO acknowledgements, late ASNs, etc. in the e-Procurement system will raise flags of issues that need to be investigated faster than a CLM will

For many companies, one of more of these applications are critical, and they will need to be implemented as soon as possible, but all require a baseline e-Procurement system in place to deliver the full extent of value you want to realize — spend analysis requires the data, SRM requires the data for ongoing monitoring and management, and the e-Pro is what captures the spend-related obligations and can be among the first of the internal systems to provide clues that there might be a problem.

So start with e-Procurement. But whatever you do, don’t stop there … don’t even slow down. As soon as you get a baseline and it’s useable, work on addressing your greatest need from a cost control/value generation perspective. e-Procurement is just the beginning … and the best way to think of it is the forge you use to craft better tools and processes that need the data e-Procurement captures and produces to deliver their full value.

On to Part V!

Dear Build-to-Order / Make-to-Order — Dumpster Dive if you want to Survive!

A big thanks to Lora Cecere, the Supply Chain Shaman, for inspiring this post as a result of her recent Thoughts on Thriving. I’m sure she had zero intention of doing so, but when inspiration strikes … it’s time to write!

One of the advantages of working with a LOT of engineers (and I mean a LOT of traditional engineers, not code junkies who may or may not have a formal, accredited, education), is that you get to talk to a lot of engineers in build-to-order / make-to-order direct (reliant) industries, and even three years after COVID started, and a year after the majority of the world proclaimed it over (and secretly accepted its endemic and we just have to live with it), manufacturers with build-to-order / make-to-order divisions are still having significant issues which primarily focus around:

  • a 12-to-24 month wait for (critical) parts (despite getting orders in early, and often being told they are a “priority” or a “customer of choice” [which pretty much only means the supplier chose to take your money])
  • a lack of a modern order management system that can make sure that the parts are properly allocated when they come in to the customer they were for (and not auto-allocated in a group as soon as any “build” can be completed, often allowing a smaller customer to jump the queue over a larger one that’s been waiting six months larger — and, FYI, even SAP installations don’t necessarily solve this)
  • a lack of engineers qualified to maintain / refurbish existing systems until the parts arrive to allow the replacements to be built and …
    as Lora pointed out
  • inventory glut in their pre-manufactured systems divisions as inflation curbs demand from those thinking twice about an unnecessary purchase, or one that can be delayed.

These divisions are usually separately run on different P&Ls, and often entirely different, fully owned, companies, which use different, non-complementary, and often destructive, strategies to deal with their problems.

The inconsistent, wrong, and often destructive, decision by the pre-manufactured consumer / (small) business division, seeing a monthly increase in inventory (storage) costs in conjunction with a decreased market value (as competitors announce newer “better” products), is usually to just find a very large retailer or distributor who will take them at a (massive) discount, especially if, across all units produced, they can break even or minimize the loss, and move on. (And if the organization gets desperate for cash, sometimes fire sale the inventory in a reverse auction.)

Why is this wrong and destructive? In many cases, the products, and more specifically, the parts they contain, have value well beyond what the organization ends up getting and, in fact, with a little re-engineering could often be used to solve the make-to-order / build-to-order crisis in the other division, at least in the short term. Even if the systems say it can’t be done or the engineers don’t tell you that it can.

What you need to understand is that the problems we are facing are exacerbated by business models that are typically built by business people with limited engineering knowledge and often no understanding of a real engineering mindset. Couple this with the reality that most engineers have limited to no knowledge of the larger business, limited knowledge of how to communicate alternative business solutions to a crises in business terms, and usually no willingness to do anything that would rock the boat. (You need to understand that some of the lies in the engineering stereotype are true. [Cue Huey Lewis.] Understanding this helps with effective communication.)

More specifically, the business models that dictate:

  • complete separation of divisions
  • using outdated systems, because there’s still x years on the amortization
  • never deviating from the initial design and bill-of-materials because that’s what was sourced/agreed-to-contracted, or whatever and/or
  • rigid separation of duties between product lines and divisions, even when the engineering team is qualified to work across them

And, ultimately, prevent creativity, re-use, and, most importantly, creative destruction where this could be the only solution to current problems. These business models and systems work(ed) well in predictable normal operating conditions when there was always sufficient, or excess, timely supply, but those days are gone and might never come back. (The next pandemic could be tomorrow, wars are still raging and having global impacts, multiple countries are amidst various levels of political upheavals, inflation and/or recessions are rampant globally, and supply chain disasters that used to be once a century are now more frequent than once a decade.)

Adaptability is key. The control system needs a processor? Who cares if the one in that pre-built unit in inventory not selling is based on a two year old design — it’s probably still more powerful than is needed and more than likely to survive the lifespan of the unit. Or, worst case, you over ordered the high-end model and need to rip out a more expensive component. If you’re talking a multi-million build-to-order contract with a key (strategic) customer, what’s a few margin points vs. not fulfilling the contract at all and possibly losing the customer?

In other words, if you’re going to treat excess inventory like trash, it’s time to dive into your inventory dumpster, find the diamond parts, and send the rest for recycling — individual business unit / P&Ls be damned. At the end of the day, it’s the overall health of the business, and transferring inventory from division A to division B at cost (to keep the accountants happy) so that a unit that would otherwise take a big loss prevents that loss and even makes a profit for the business is the right decision!

And if you let the engineers out of the tiny cubicle you forced them into, you’ll realize that the one thing a typical engineer is really good at, and the one thing a typical engineer wants to do, is solve these types of systems problems. Real engineers love the challenge! It’s the one thing that excites them more than any business process or perk you can offer them (with the possible exception of more pay, but even that is temporary joy because the smarter engineers realize if you’re offering them more pay without them asking, they must be worth way more to a competitor … and if they’re going to work in a box, they might as well be paid handsomely for it).

So, don’t be afraid to be creative, flexible, and dumpster dive! (And don’t tell me the customer won’t accept any variation on the order … if their business is being held up or seriously impacted by your delay, and they know they can’t get what they need any faster anywhere else, they’ll work with you on a modification they can get next month that will do the job versus having to wait another year.)

And if you don’t have a pre-manufactured division, this advice still applies to you. Except, instead of dumpster diving in your organization’s own inventory, do so in pre-manufactured systems being sold at heavy discount (for the purposes of dumping), local suppliers with excess inventory of products with usable components, and even consumer electronics stores (where deep discount computers can yield perfectly good processors and memory that can be worth as much as the entire system to you).