Monthly Archives: September 2023

A Circular Battery Economy is Necessary For Green Vehicles

Regulation (EU) 2023/1542 of the European Parliament and of the Council concerning batteries and waste batteries took effect this summer (on 12 July 2023 to be precise) and it’s a good first step towards a sustainable battery economy that will, hopefully, reduce carbon in the long-term.

When you consider that all of the zero emission claims for battery-powered vehicles are complete bullcr@p when you consider the carbon emissions to produce the vehicle, the carbon emissions required to produce the battery (which, in an inefficient process, can be more than 2X the emissions to produce the rest of the vehicle), and then the emissions to charge the battery from what is usually an oil or coal power plant, you might have to drive as much as 1,000,000 kms just to reach carbon neutrality! (And while the linked article doesn’t work out the best case scenario, it’s likely you’re driving the full warranty, or about 200,000 kms, to reach carbon neutrality when you’re charging the batteries burning oil or dirty coal.)

And even if the vehicle production is optimized, the battery production is optimized, and the power grid is primarily powered by pure renewable energy, it’s still not zero emission. The production of solar panels emit carbon, the production of windmills produce carbon, the building of dams and the generators that run them produce carbon, so you have to amortize that over the expected lifetime every time you charge that battery. So even a green vehicle will produce thousands of kilograms of carbon in its production, thousands of kilograms of carbon in its battery production, and hundreds to thousands of kilograms of carbon during its recharging. If you’re lucky enough to have the best case scenario with access to high efficiency solar, then you can get your carbon footprint down to about 10g per kwH over its expected lifetime, or a mere kg of carbon per full charge (or 400 kg over the first 200,000 km), and you approach carbon neutrality not long after you negate the production costs (which you might never do today as some methods to produce new batteries are so dirty). (But most of us do not have access to clean solar grids.)

This means that most first time produced vehicles with first time produced batteries are actually quite dirty. Very, very dirty. And the only way we’re ever going to get greener vehicles is to 1) cut down the carbon on vehicle production and 2) cut down the carbon in our power generation. Now, until we ban power production from oil, coal, and natural gas for fixed location power production (and build enough renewable power plants or start building micro modular reactor grids [where you could literally keep enough concrete on site to safely bury one in the case of a pending meltdown] and take advantage of the Onkalo spent nuclear fuel repository), there’s not much we can do about 2), but there are lots of things we can do about 1). First of all, we can make vehicles with more longevity (better part quality, more rustproof materials, easy part replacement, design for recycling, etc.). Secondly, we can design our batteries for reconditioning and recycling, to minimize the carbon production in the creation of future batteries, to make the next generation of vehicles greener.

But history has taught us no one does the up front research to design for recycling, or invests in recycling without regulation, so any regulation that forces companies to make more sustainable, circular, and safe batteries is not only a good thing, but the necessary first step on the road to truly getting green(er) vehicles.

A Slow Cautious Approach to Pulling Out of China May Be Justified …

… but the justification has NOTHING to do with geopolitical events or economic factors, as suggested by this recent SCMR article. First of all, those are always in flux. Secondly, neither of these factors are the ones that could be limiting your ability to peel out.

There are two primary factors that could be limiting your ability to peel out of China:

  1. available production capability
  2. source material availability

And these are the only factors you should be considering when you are considering how [do] you reconfigure the global supply chain. Because, unless you are selling in Asia, you HAVE to get out of China if you want stable supply streams.

Available Production Capability

First of all, are there alternative near-shore plants? If not, you’re stuck until you (co-)invest in one, get it built, get it up and running, and verify the quality is acceptable. If there are, can they produce the products you need in the quantities you need, or at least a reasonable percentage? If so, are the quality and service levels sufficient. If there are three or more near-shore suppliers that can collectively meet your needs, you shift a considerable amount of your award to them immediately (depending on existing contracts, the time-frames for the suppliers to fully ramp up to support your business, and the time-frames your organization needs to get ready to support the shift) and start the process of shifting all of your award to them.

Source Material Capability

You also have to consider where the raw materials are coming from, and how easy it will be for your suppliers to get sufficient stacks of the materials you need in steady supply. For example, if you need lithium-ion batteries produced by current processes, you need cobalt. 73% of today’s cobalt comes from the Democratic Republic of Cobalt (DRC). The DRC has considerable trade agreements with Qatar. So while the country has bilateral trade agreements with over 50 countries, its relationship with Qatar could cause you problems if you want to use a producer in the middle east NOT in Qatar if another diplomatic crisis (like the one in 2017) arises.

Also, China is the largest producer of grains, gold, coal, rare earth minerals, and two hundred (200) plus other materials, components, and products, so if your production depends on any of these materials, components, or products, you need to make sure your suppliers are located in countries who have good relations with China or have already locked up enough secondary sources to guarantee your product production will be uninterrupted.

That’s it. Yes, you have to consider the economics, because you can’t pay 50% more and not seriously upset (and lose) your (current and potential) customers with the price increase that will result, but with proper investments in new processes, equipment, and talent, costs can be reduced anywhere in the world, and all it will take for the potential supplier to make these investments is enough guaranteed business from you. (So make it so!)

Of course e-Auctions and Smart Procurement Can Help Beat the Current Chaos …

… and when the doctor saw yet another obvious headline that was something he would have expected to see two decades ago, he was quite tempted to click past it as he’s already seen forty plus regurgitations of the same message over the past two decades. However, the subheading was something new … “CIO’s should engage with their procurement colleagues to understand how they could benefit from more sophisticated IT purchasing“. Many an article touts the value of Procurement, especially in tough times, and many more tout the value of IT Procurement (with a modern emphasis on SaaS), but not many tout the importance of collaboration, especially in tough markets. So seeing this subheading at the top of a recent article on The Stack was welcome.

The reality is that if organizations want to get through these tough times, every department that has to buy needs to work with Procurement, and we mean work, not just use. It will require a mix of category expertise, market expertise, process expertise, and procurement platform expertise to be successful. Procurement can bring the procurement platform, process, and some of the generic market expertise, but it will need the category experts in the various parts of the business to bring the expertise on supplier capability and the category expertise it is missing.

IT Procurement is not easy. A modern organization has to procure:

  • SaaS solutions — where you have no idea what you should be paying (without a SaaS market specialist, who can only get you within a range)
  • cloud computing / rack-space — to run your back office, store your documents, build your custom cloud offerings — and you have little idea how much you should really be paying here either (without a specialist, as all you know is the public quotes)
  • office computing equipment (laptops, tablets, smartphones, etc.) — and while you get plenty of “market intelligence” on public sites like Amazon, Walmart, Best Buy, etc.), how accurate is it when you sometimes see $400 discounts on a $1000 machine … you need to know the specs, the warranty, etc. and how they compare to similar machines … and how much better an i7 is compared to an i5, and if you even need an i7 when all the machine is going to do is access SaaS solutions and run Microsoft Office

And IT is not the only category where the right mix of Procurement know-how and category expertise from the end-user is needed. Most categories in engineering, back-office, maintenance, pharma, etc. require a lot of specialist expertise.

But with the right expertise, success is guaranteed. Prices might go up (that’s what happens during inflationary times), but Procurement can keep those increases to a minimum, and at a point less than what the competition is seeing. And that’s the worst case. In the best case, inflation has not yet hit the category and good processes and practices actually reduce the cost. And in both cases, the supply will be stable, secure, and of at least standard quality. So use Procurement Processes and Practices. They can only help.

Sourcing and Supply Chain Jobs CAN NOT Be Automated

Raconteur recently published a great article that noted that the next big shortage to watch [is] supply chain skills, and they were entirely correct when they noted that it’s ironic that the profession struggles with its own supply of talent. They were even more on the money when they said walk into a meeting of supply chain managers and you might wonder whether you’ve stepped back in time several decades because the statistic published in 2021 by Logistics UK that 89% of people working in logistics and supply chain are men.

Furthermore, they scored the hat trick when they noted that employers are struggling to find talent, and that is because not enough talent is entering the industry. Why is this? That’s a good question, and unfortunately Raconteur stopped with the hat-trick because the rationale they gave for lack of new entrants is only part of the problem.

According to Raconteur, the reasons for the lack of recruits are:

  1. Procurement is high on the list of roles at risk of being automated to extinction
  2. The recent slew of media reports highlighting failures in important supply chains may be deterring potential new entrants away

And while constant claims of procurement automation and constant reports of failures are unattractive, it is not the core problem (but merely the manifestation of the problem).

The real problems are the continuing:

  1. Lack of Marketing by the Profession (and why a Procurement/Supply Chain Manager is someone who’s cool)
  2. Lack of Education in most/leading University programs

Corporations who value engineers do great advertising on how cool it is to be an engineer working for them (think Siemens). Oil & Gas and Mining industries who need geologists and specialists to find new deposits do great advertising on how cool it is to be an explorer in the modern world. SaaS / Social Media companies that need great software developers do great advertising on how it is super cool to be a techie. Have you ever seen any corporation ever make it super cool to be in Procurement or Supply Chain? Even Apple, which won on supply chain management, never advertised how cool it would be to be a supply chain manager for them. As a result, Procurement and Supply Chain only recently entered the general vocabulary, and most people only paid attention as a result of the massive failures that came to light under the pandemic*.

Most University programs, two decades after we needed courses on modern Procurement and Supply Chain Management, still only teach classical Operations Research and Logistics. Logistics is important, but the age of Logistics was two decades ago. As Will Smith told us back in 2002, no one wants to be in the old and busted driver’s seat (see the clip). They want to drive the new hotness, but all Universities want to teach them is how to drive the same old and busted processes and practices the Professors learned in the 1980s (which were taught to them by the Professors who invented them in the 1960s).

Since Universities aren’t modernizing, no one graduating understands what Procurement and Supply Chain really is, so when all they hear from the media is failure, why would they want to even look into a profession that is apparently as high stress and fraught with risk as a surgeon or a defense attorney? Furthermore, since companies aren’t even spending a dollar on promoting how cool it is, and how much they need these people, it’s not a stretch to believe that the companies aren’t promoting it because they plan to automate it.

But Procurement cannot be automated. Technology can automate tactical procurement tasks such as:

  • regular restock reorders
  • auto-PO generation and delivery
  • auto-invoice matching / auto-correction requests
  • third-party supplier data validation through APIs
  • auto-supplier discovery from third party networks
  • auto-supplier risk profiling from third party data feeds
  • etc.

because technology is good at the “thunking” — the semi-mindless processing of electronic paperwork to make sure the i’s dotted, the t’s crossed, and the request valid as per business rules. However, technology, especially technology powered by Automated Idiocy, is NOT good at the thinking. You need Procurement Professionals, Sourcing and Supply Chain Superstars for those tasks, which permeate the entire Source to Order and Order to Delivery supply chain cycles. For example, as a counter to the above, technology cannot

  • adequately adapt to highly dynamic demand changes (especially when it doesn’t know why)
  • determine when new products or services NOT in the system will need to be ordered to support one time projects, replace products that will not arrive on time due to supply chain disruptions, replace services where the provider loses the resource with the proper training and certifications, etc.
  • handle the negotiation on the 1% to 5% of invoices where the provider won’t correct the missing information or the pricing on an auto-request
  • be able to validate the API where a human has to call another human to get the necessary information
  • find new, innovative, suppliers NOT in the connected network
  • customize the risk-based vetting to the specific need and acceptable thresholds
  • etc.

So, yes, some of the accounts payable paper pushers are going to lose their jobs as the thunking takes over, but that’s NOT Procurement, and definitely NOT Strategic Sourcing and Supply Chain where a human IS desperately needed. And yes, you will need to be familiar with the best of modern technology as a new professional in our field, as the job will soon be impossible without it, and you will need the augmented intelligence it provides to be efficient, but the technology cannot replace you.

So join us. And run the modern world.

* Not brought on by the pandemic as it was bad supply chain design and management that resulted in the pandemic breaking supply chains. Had the supply chains been properly designed, all the pandemic would have done was slowed them down. So don’t blame the pandemic. In fact, if you want to place blame, remember it was the Big X and mid-sized consultancies which started the ridiculous outsourcing craze instead of helping us improve the home-source and near-source supply chains we had that were working great, and put us in the situation where we have to reconfigure global supply chains all over again, and then remember YOU agreed to it!

Yes, McKinsey This Is Generative AI’s break out year, BUT:

We should NOT be celebrating the fact that it broke out of the prison it should be contained in only to:

So, even if your Global Survey confirms the explosive growth of AI, you should not be celebrating Generative AI’s breakout year and hold off celebrating until someone manages to put this destructive brain-dead genie we’ve unleashed back into the bottle it was released from!