Monthly Archives: August 2023

Digging into Logistics Sustainability

In our article on Solving the Sustainability of the Supply Chain is Systematically Strenuous and Surprisingly Serpentine, we noted that while there are easy two-word answers for reconfiguring the global supply chain for greater supply chain assurance and more sustainability at the 30,000 foot level, when you dig into the details, it’s not so easy as you have dozens of facets to get right to truly optimize sustainability across:

  • Support
  • Sales
  • Logistics
  • Procurement
  • Manufacturing
  • Materials

Logistics sustainability is much more involved than just “green transportation” and using “zero emission“*1 electric vehicles, because there’s a lot more to logistics than the plane, train, boat, or truck. There’s also the:

  • Packaging – is the packaging reusable, reclaimable, recyclable, or compostable; minimal?
  • Warehousing – are the warehouse operations sustainable?
  • Routing – is the routing designed to minimize unnecessary distance, handling, and environmental impact?

Let’s dive into each of these:

Packaging involves ensuring that the following are sustainable:

  • Materials as the only trace of us millions of years in the future — after the “right to be stupid” crowd manages to vote in the greedy, power-hungry, self-nominated populist con-artist candidate in enough first world countries*2 — will likely be microplastics*3 and plastic molecules which, even after millions of years, will never fully dissolve (and which are already so omnipresent that microplastics are even in all of our bodies now)
  • Manufacturing as the packaging needs to be manufactured just like the product
  • Logistics as the packaging has to be shipped to the product manufacturer
  • Packaging as the packaging needs to be packaged to be shipped to the product manufacturer

Warehousing involves ensuring that the following are sustainable:

  • Heating & Cooling since most warehouses are built super cheap (thin metal structures) and, thus, require ridiculous amount of carbon-based energy production*4 to heat or cool
  • Operations since warehouses use forklifts and robotic automation — which are not necessarily green, energy efficient, and/or well designed
  • Workforce since there needs to be a sufficient workforce and there needs to be training in place to make sure they workforce is suitably skilled for the job

Routing involves ensuring that the following are sustainable:

  • Transportation Modes as most international shipments are multi-modal (and involve at least two different means of transportation, and usually three)
  • Cross-Docking as shipments will need to be unloaded from ships and trains at ports and yards and loaded onto trucks and unloaded from big trucks onto smaller trucks at local depots
  • Leg-Routings as ships can’t disrupt whale schools, dolphin pods, or fish colonies (which might also be needed for food); planes shouldn’t fly low through wildlife/bird reserves; trains shouldn’t pollute the forests they run through; etc.

In other words, there’s a lot more to logistics sustainability than green transportation, which isn’t exactly green to begin with!

*“Green” vehicles aren’t anywhere close to zero emission when you consider all of the emissions created in the production of those electric vehicles and those battery packs! For example, as quoted on the MIT Climate Portal, building the 82 kWh lithium-ion battery found in a Tesla Model 3 creates between 2.5 and 16 metric tons of CO2 (exactly how much depends greatly on what energy source is used to do the heating). This intensive battery manufacturing means that building a new EV can produce around 80% more emissions than building a comparable gas-powered car. And then you have to consider all of the emissions produced by your energy provider to produce the electricity that recharges your battery pack every few hundred kilometers (or 0.6214 miles for you Americans). If your local power plant is still burning dirty coal, then you could be responsible for the creation of 950 grams of CO2 per kWH. So if you’re driving a new AWD Performance Tesla, you’re producing 77.9 kg of CO2 for every 567 km you drive. In comparison, if you’re driving a Toyota Yaris that gives you an average of 36 mpg, or 58 kpg, you’re burning 9.78 gallons and producing roughly 86.9 kg of CO2 for the same 567 km. In other words, you’re only about 10% more green on a per-tank basis driving that Tesla 3 if your local power provider burns dirty coal!

In other words, “green” transportation isn’t necessarily green if you don’t consider the energy product or the up-front production. If the battery production emits 16,000 kgs of CO2, all other vehicle production related emissions are equal, and you are using electricity produced from dirty coal to charge the battery, you don’t see the first drop of CO2 savings until you drive almost 1,780 tanks or 1,000,000 kms! And then you only see a 10% if, and only if, as stated above, the production of the remainder of the vehicle has about the same CO2 production as an average vehicle for its size.  (Which means, at the end of those warrantied 192,000 kms, that green Tesla won’t even be Carbon Neutral!  It won’t even be one fifth of the way!)

*2 greedy, power-hungry con-artists who will repeal all environmental laws, take away all our basic human rights, and even start wars that could not only end all wars but end us (assuming the AI they are using to replace us doesn’t end us first)

*3 after the last last satellite has plummeted back to earth (and burned up), the last skyscraper has crumbled, and the last pyramid has turned to dust, traces of certain microplastic molecules that do not occur naturally in nature will still be found in the soils and at the bottom of the ocean where there are no lifeforms to break them down

*4 even renewable energy such as solar, wind, and hydro has a carbon footprint as the panels need to be manufactured, the turbines need to be manufactured, and the dams need to be built and all that involves carbon production with today’s technology

Solving the Sustainability of the Supply Chain is Systematically Strenuous and Surprisingly Serpentine

There have been a lot of articles about the sustainability of supply (chains) lately, and some of them are quite good, but not a single one gives you the full picture. And if you were hoping this article was going to do that for you, then the doctor has bad news for you. That’s not an article, or even a book. It’s a trilogy. Of trilogies. And while the doctor has written that much on this blog by word count, it’s not going to happen today.

What is going to happen is that the doctor is going to give you a bit of an understanding of how broad, deep, and complex the problem really is and how it’s almost impossible for most people to solve, although not that hard to address with a reasonably high assurance of results. (And the answer, as regular readers will have surmised, does NOT involve any Artificial Idiocy, but it may involve complex processes and technologically advanced solutions.)

In order for the supply chain to be sustainable, every step of the supply chain has to be sustainable. Internally:

  • Procurement needs to be sustainable. The processes, technology, and talent required to keep the Procurement organization going need to be sustainable.

If you work down the chain:

  • Logistics needs to be sustainable. The methods used by the suppliers and distributors to pack, store, and ship the product to you need to be sustainable.
  • Manufacturing needs to be sustainable. The methods, energy sources, and water sources used to produce the goods have to be sustainable.
  • Materials need to be sustainable. This means that all of the materials used must be renewable, decomposable, or fully reclaimable in a sustainable manner.

And if you work up the chain:

  • Logistics needs to be sustainable. The methods used to pack, store, and ship the products to your customers need to be sustainable.
  • Sales needs to be sustainable. The processes, technology, and talent required to keep the Sales organization going need to be sustainable.
  • Support needs to sustainable. The processes, technology, talent, and materials used to support, repair, or reclaim the products (for recycling and material reclamation) at end of its lifecycle need to be sustainable.

That’s a lot of sustainability that is required up and down the chain. It’s much more than just identifying a “sustainable” supplier who hits ESG targets, favouring renewable materials, or using virtual work (from home) solutions to reduce the travel and office carbon footprint. And attacking it requires a lot more than just attacking the 5 Cap Gemini supply chain transformation levers of Evolution, Orchestration, Data, Technology, and Talent or the 6 McKinsey next-normal strategy focus areas of Agility, Quality, Sustainability, Resilience, Service, and Cost and Capital because buzz-words are not solutions and you can’t decipher all of these dilemmas at the 30,000 foot view.

In other words, while there are easy two-word answers for reconfiguring the global supply chain for greater supply chain assurance and more sustainability at the 30,000 foot level, when you dig into the details, it’s not so easy as you have dozens of facets to get right to truly optimize sustainability across the supply chain.

In future posts we will dig into a few of these areas as addressing them is a lot more complex than you might think!

There’s No Nearshoring Revolution on the Horizon!

the doctor recently saw a headline that the nearshoring revolution is just beginning, and while he wishes this were true (as he’s been preaching the need for a nearshoring revolution since Sourcing Innovation started, which, for those keeping track, was 17 years ago), it’s not.

A few progressive thought-leading innovators are doing it, but a few is not a revolution. It’s just a few people and organizations who are both willing to do the right thing and wealthy enough to
a) pay for all the upfront costs (where the return may not be recouped for years) involved in shifting a supply chain, bringing new factories online or upgrading those that have been offline for years (or decades) and
b) not be beholden to investors, shareholders, or Wall Street demanding profits now.

The reality is that reorganizing supply chains has a large upfront cost and when most corporations are beholden to shareholders who want profit now, Private Equity firms who want profit now, and Venture Capitalists who want profit now, the last thing they want is upfront cost. They want margin, and the best margins are finding the lowest cost of supply out there and using that, even if it means continuing to source from halfway around the world with all the risks involved (and the losses that would accompany any of those risks), especially if you can buy supply chain insurance at a reasonable cost.

As long as the backward-thinking financial models and economics continue to focus on profit over value or true wealth creation, nearshoring is going to face the same obstacles that Corporate Social Responsibility and Sustainability has faced for the last two decades where everyone says they want it, but unless legally mandated, no one is willing to pay for it. the doctor is aware of multiple surveys that have been conducted in this area over the last couple of decades and while a majority of respondents will say it’s top priority, the majority will not even pay 3% more for a more sustainable product or service as the success criteria they are eventually measured on in Procurement is total “savings” (regardless of the long term cost to society).

The reality is that most corporations bought into the Big outsourcing push of the 1980s and 1990s because their managers and primary shareholders were greedy and wanted profits sooner rather than later, and while that mentality persists, they’re not going to be willing to absorb the upfront costs of shifting back. To truly fix the supply chains, which is as simple as “F*CK China” in the Americas and “F*Ck the Americas” in China as the doctor pointed out in his recent post on how you reconfigure the global supply chain, you need a no upfront cost solution for organizations to switch back, or a value proposition beyond assurance of supply.

In the United States of America, for this to happen the MAGA crowd, instead of wasting all their efforts trying to take away basic human rights away from their citizens (while they are simultaneously trying to put an angry grandpa back in office and hide the huge “gifts” they are getting from certain parties that benefit greatly from laws they pass or block), needs to focus on solutions to actually bring the jobs they are claiming to fight for back to the Americas, which could include:

  • interest free loans for building supply chain infrastructure such as factories, distribution hubs, ports, etc.
  • free, or heavily subsidized, training for Americans to do these jobs
  • higher tariffs on any
    imported products that are produced at sufficient volumes in America to satisfy the American market
  • higher taxes on any
    exported products that should be sold at home

Unless the value is created, or China Sourcing is banned wherever products could be sourced from the USA, Canada, Mexico, or friendly Central/South American states, the nearshoring revolution will not happen. There’s no incentive for it to happen, and no Tribore Menendez taking up the charge!

Ten Best Practices for (Software) Vendors, Part 5 (Yet Another Bonus Tip)

In this series we went over the ten best practices that you as a startup or small vendor should be aware of and address appropriately if you want any hope of growing and scaling a successful vision beyond blind luck. We did this because the majority of analysts and experts don’t give you this insight in the clear cut fashion to help you understand what you need, why you need it, and who you need it from (in the form of an expert) to get you where you need to be.

While buyers need a lot of help, and the primary purpose of Sourcing Innovation is to give them the insight into the market, the vendors, the best practices, and the knowledge they need to be successful, Sourcing Innovation realizes it also needs to help vendors because buyers need better solutions as well as better education, and they won’t get those better solutions without successful vendors to deliver them.

And while the challenges might be too numerous to ever fully cover on any publication, as the list of best practices would get very long indeed, many are very niche and would only help a few vendors and can be overlooked with the goal of addressing, and solving, all the common issues first and if the niche ones are significant, then a vendor can engage an expert for a short period of time to address them.

To date, we have covered the following 11 best practices in this series:

  1. Identify the Market Sector You Are Competing In
    … and the Niche Your Solution is Targeting
  2. Do Your Market Research
  3. Define Your Target Industries
  4. Identify the Core Pain Points Your Solution Will Address in the First Release
  5. Understand the Data Needs and Design the Full Data Model
  6. Understand the Current Customer Processes and Typical Restrictions
  7. Don’t Overlook the UX (User Experience)
  8. Get the Messaging Right
  9. Price It Right
  10. Get Advice AND Listen to It
  11. Get The Help You Need! (And Get It Sooner Than Later!)

They are all important, but they don’t cover everything. And while we shouldn’t have to cover this 12th bonus practice, because it should be covered by Best Practice #8 and #10, given the state of the the technology space today, we have to bring it into the limelight.

#12 Don’t Mention AI. Not Even Once. Not Even If You Are Using Proper AI!

Customers are looking for vendors who are offering solutions, not buzzwords. Who are offering solutions that provide repeatable, explainable, provable answers, not random, black-box, suspect answers that could be based in fact or fiction, especially if trained off of random internet data with no fact checking or supervised learning.

Maybe AI gets you analyst attention (and it might be required to get ranked high in some analyst reports, but as we’ve already explained, that’s complete bullshit and we would not expect those analyst firms to stick around very long, or stick to this if they want to stick around and be taken seriously), but as more and more buyers experience the false promises of “AI” first hand (and push back against analyst firms that only push AI vendors on them), we expect customers to start blacklisting vendors that only sell “AI” and not actual solutions or services (and analyst firms that only push “AI” vendors on them).

Maybe AI gets some potential customer attention because you must be a technology advanced vendor to be using AI, if your claims are true, but all it’s going to do at a smart company (and you don’t want dumb customers in tech, they always cost more than they pay you) is get you in the door, and if you can’t deliver a good demo, and convince the C-Suite (who, seeing all these failures, are, or soon will be, becoming suspicious of AI for AI’s sake) you have a valuable solution that is guaranteed to deliver a significant ROI, you’re not going to get the sale.

Furthermore, as we’ve said over and over again, there is no true AI (at least Level 4) and anyone with a working brain who uses that brain knows this to be true. Your target customers are beginning to realize that most solutions are Augmented Intelligence (Level 2) at best, and often only Assisted Intelligence (Level 1), and then only for specific functions or insights, which are often a very small subset of everything they are expecting the solution to do.

Plus, any advanced capability that is reliable is not based on some random, black box, untrained mystic technology, it’s based on specific algorithms, trained on known data sets, and tweaked with a well defined set of parameters in a well defined range that have known, predictable, responses to specific data sets and situations. More specifically, we’re talking parametric curve fitting, (MILP) optimization, clustering, pattern matching, neural networks, deep learning networks, etc.

Thus, instead of just claiming “AI”, you should name the technologies, describe how you’ve applied the technology to solve the problem, be prepared to overview the validations you applied, and summarize the results you achieved and how much better they consistently are compared to more traditional algorithms and solutions the buyer is likely using at the present time, if they are using any solutions at all. This will get the buyer’s attention and prove that you know what you’re doing and your technology is an actual solution, not buzzword vapourware.

At the end of the day, customers want success, and AI, on its own, does not guarantee success. (In fact, unhindered AI guarantees failure if utilized long enough. That’s the beauty of probability and statistics. Eventually anything built purely on black box statistics WILL FAIL!) Plus, many buyers are old school, barely trust tech as it is, and are very worried that AI will take their jobs (and even if it can’t, they believe that management is looking for every opportunity to use AI and replace them, even if the technology is inferior, so the last thing they want to do is bring in technology that management could try to use against them). So not only can focussing on AI undermine the power of your solution, but AI can turn off potential customers who want to feel safe in their jobs.

We’re not saying to lie about using AI, or to avoid the discussion when you get in front of the customer, we’re just saying don’t follow the crowd and the hype and don’t focus your marketing on AI. Focus on the solution. “AI” is just another tool in the technology development tool belt. It’s not a solution on its own. And customers need solutions, not Automated Idiocy. Finally, here’s another bonus best practice.

#12B … And Don’t Use AI to Write Your User Manuals, Thought Leadership, Blog Articles, or Sales Materials Either!

Ten Best Practices for (Software) Vendors, Part 4 (Bonus Tip)

In Part 1 we noted that, just like buyers, you need help. And then, in Part 2, we made it clear that in order for you to understand you need help, you need to understand where you might need that help and that’s why we are doing this series for your benefit and going deep. In Part 3, we completed coverage of our ten best practices, to be as fair to you as we were to buyers when we gave them our Five Best Practices for Buyers, which built off of our articles on five easy mistakes source to pay tech buyers can avoid and even a critical sixth mistake most tech buyers make in source to pay (who need to realize that No Tech Should Be Forever).

The ten best practices are:

  1. Identify the Market Sector You Are Competing In
    … and the Niche Your Solution is Targeting
  2. Do Your Market Research
  3. Define Your Target Industries
  4. Identify the Core Pain Points Your Solution Will Address in the First Release
  5. Understand the Data Needs and Design the Full Data Model
  6. Understand the Current Customer Processes and Typical Restrictions
  7. Don’t Overlook the UX (User Experience)
  8. Get the Messaging Right
  9. Price It Right
  10. Get Advice AND Listen to It

But as we noted, even though this covers the majority of mistakes we see over and over and over again in startups and small companies, this is not everything. And while we can’t cover everything (and wouldn’t even if we could as some mistakes are for markets or solution areas so niche, it would only help one or two companies whereas this advice applies to all the companies in our space), there is one more piece of advice that cannot be understated!

#11 Get The Help You Need! (And Get It Sooner Than Later!)

As a startup/small company, or even a mid-size company, you don’t know everything. You can’t. You have fixed resources to work with, and most of your cash has to go into developers to build the product, implementation consultants to install or configure it, sales to sell it, operations to keep the business running, and finance to keep the lights on. Even if you can find them, when you are small you often can’t afford the best marketers, product visionaries, algorithm experts, researchers, etc. on top of all the people and SaaS platforms you need to keep your business going. Then, as we pointed out above, there is all the expertise you are missing. While you will have many strengths to get to the point where you have a saleable product, you’ll also have many weaknesses.

Get help where you need, or can make, improvement(s), from an industry expert, consulting analyst or consultant. While their quotes might give you sticker shock at first, because you think to yourself that you can hire a FT resource for what a consulting analyst charges for 25% of their time, you have to realize that you would do so with the caveat that it will take that FT resource years of research to get to the same level of expertise that the consulting analyst brings to you in the first minute of engagement.

Your hire will have to do weeks or months of research to understand the market or the problem, while an expert can start working with you on a solution right away as they have already spent years, or decades, researching the market and problem. Your hire will be working at an industry average pace and level of capability at best, while an expert will be working at an expert level of capability and an above average pace as they have honed their processes and techniques to maximum efficiency. Remember that you’re not just paying for time, you’re paying for expertise you can’t hope to acquire in the near term (and expertise you need to be successful and grow your company to the point where someday you can hire someone of their caliber full time), to get the solution you need now (be it an algorithmic or process solution to a difficult problem, a better roadmap, customer intelligence, good pre-sales or marketing materials, engagement strategy, etc.) and not a year down the road (where you could be financially unstable if you haven’t solved the problem or grown your customer base). Furthermore, once that solution is delivered, you don’t have the ongoing overhead of a high-paid full-time resource where their skills may only be needed part of the time.

If you don’t think you need help anywhere (considering all the skill sets it takes to not only take a startup to financial stability, which often happens in the 1M to 5M, but break through this barrier where most startups get stuck until they eventually become founder lifestyle companies serving the same small customer pool in an optimized model or simply fade out of business as renewals end), then you don’t know where your weaknesses are and should get an expert to do a full/high-level end-to-end assessment to help you understand the true strengths and weaknesses of your product, marketing and business model with respect to the market.

the doctor has yet to encounter a startup or small company in our space that doesn’t need help somewhere with the above best practice requirements to success. Never. (This doesn’t mean that he hasn’t encountered a startup/small company he couldn’t help, as the needs of some of the companies he’s talked to, and many others he’s aware of, were not in his core strengths, but simply means that he’s never encountered a startup/small company that didn’t need help from the right industry expert. This should be easy to understand because if those companies had recognized they needed help and sought it out, it is extremely likely they would be larger companies and/or market leaders given the relative lack of modern procurement solutions in an average mid-size or larger company compared to other back-office solutions. In every niche there is room to grow, and if a company with a suitable solution isn’t growing, it’s because they aren’t doing something right and, thus, need help to get it right.)

It’s important to remember that admitting you need help is not a sign of weakness, dumbness, incompetence, or any other negative condition a loser might want to associate with asking for help, but a sign of true courage, strength, and intelligence and what a winner does. If you’d ready any good books on startups or growing a startup to a successful company, including Garry Mansell’s Simplify to Succeed, you’d know you need at least five very different, and sometimes conflicting, skillsets to create a successful company. It’s ridiculous to think anyone could become an expert in all these areas, and remain an expert in all these areas at the same time while simultaneously having the breadth of market knowledge required. If it takes 10,000 hours or five years to become an expert, that means it would take 25 years to become an expert in all the areas, and by the time you reached expert level in the 5th area, your expertise in the first area would be two decades out of date. A good leader knows their strengths and their weaknesses, a great leader also knows the strengths and weaknesses of their core team, and the greatest leader isn’t afraid to augment that with the missing expertise on an as-needed basis to bring to bear a total solution that no one can beat. Only a true loser sticks to their arrogance that they always know best, especially when empirical evidence points to the contrary.