Monthly Archives: May 2024

Valid Uses for Gen-AI!

the doctor has been told he’s too hard on Gen-AI. He doesn’t think he’s hard enough, but there are those who keep insisting that Gen-AI has some valid uses. And they’re right, it has some. Not the uses that you need it for, but actual uses nonetheless.

So today, in a rare moment of weakness, he’s going to acknowledge those uses. Soak it in. He may never do so again.

1. Ensure your insurance / bank only covers and lends to people you like.
One of the great things about Gen-AI is that almost all models are biased, and it’s really easy to train them to be as biased as you want. Only want your health insurance to accept only young people between 25 and 40 with no family history or indicators of any illness whatsoever? No problem. Don’t want your bank to approve a loan to anyone who isn’t an all American Christian white? No problem. Race-Biased Gen-AI to the rescue!

2. Have it make up a new story for your child who constantly wants new stories every night.
Train it on thousands of stories kid suitable and it will make up a new story every night (with a high probability of most those stories being safe and suitable — chances are only a few will scare them into therapy). Your kid will be happy (at least until they get scared into therapy) and your brain will get the rest it needs at night (so it can start worrying about how it’s going to pay for that therapy). Put those constant hallucinations to use. It’s your own personal Scheherazade, with just a little bit of Grimm and occasionally a bit of King (Stephen).

3. Incite the mob.
Need a mob behind you to get your cause front page on the headlines? Incite a mob to cover your theft attempt at a corporate headquarters above a luxury department store? Maybe even help you overthrow a capitol? No sweat! Program that Gen-AI to be as hateful and incitory as possible and have it pump out fake news propaganda 24/7 until you have the mob you need on your side and there you go!

4. Scam the Scammers. (Or at least keep them busy and out of your inbox.)
Most scammers will keep trying as long as someone is responding to them (and eating up their time). Guess what AI has a lot of — GPU time. Most models have 10,000 (or more) GPUs at their disposal. That’s a lot of scammers an AI can tie up for you. (Especially if they can’t differentiate easy pickings Grandpa Joe from a very agreeable but completely broke GrandpAI Joe.)

5. Take down a rival’s network.
Simply train in some sleeper behaviour for a few months into the future, and once the competition is done with their tests and trust it … poof … down goes their network.

And if you want to be truly evil, you can always use Gen-AI to

6. Ensure your terror campaign is as lethal as possible.
We’ve read the stories of how even recent tests of self-driving systems decided to ignore the shadows of what were actually people RIGHT in front of them and drive into those shadows at full speed. A few minor alterations and instead of avoiding people-like figures and shadows, it will be the murderous trolley that tries to kill as many as possible. And who says you have to limit it to trolleys? Use it to program bomb-bearing drones and it will seek out the densest crowd possible. And so on. And yes, we went to a very dark place, but just where do you think AI is taking us? There are currently NO bright outcomes. Ponder that before you go singing its praises.

Of course, if you just want to be a little chaotic around the house, and only take that first step down the dark path, just hook up it’s hallucinatory outputs to a random direction generator and use it to:

7. Power your Roomba.
Your pets will think it’s truly possessed!

So there you go — 7 valid uses of Gen-AI. You decide how many of them you want to use.

We Need to Hasten Onshoring and Nearshoring — the Drivers Will Pound Those Who Don’t Into the Ground! Part 2

In Part 1 we noted how it was great to see a recent article on Supply Chain Dive on 6 reasons why global supply chains are shifting because the unending list of disruptions, cost pressures, and geopolitical tensions are only going to get worse.

As per the article, six major factors were influencing the decision — landed costs, tariffs and subsidies, geopolitical risk, existing supply networks, agility, and ESG goals — but these are, frankly, only half of the reasons that you should be shifting back. (And again, read the article for a detailed explanation of each factor, it is extremely well written and Part 1 only described the factors at a high level.) Today, with that article as a preamble, we are going to dive deeper into why the global outsourcing craze (thatthe doctor has been rallying against and complaining about for over 15 years, since he saw the business case begin to crumble in the late 2000s) was, and is, fundamentally wrong.

Collaboration

Yes, this would is overused, misused, and abused, but if you truly want to work with your supplier, it’s much easier to work with a nearby supplier than a far-flung supplier.

First of all, they are on a similar timezone, so at least half of a normal workday should overlap. No more 7 pm / 7am meetings in the best case (or 7 am / 3 pm / 11 pm meetings in the worst cases when you also have to dial in a partner organization in a multi-tier assembly operation).

Secondly, if you need to go on site, even if air traffic is grounded (terrorist risk, volcanic eruption, dangerous solar flares, etc.), you can get in a vehicle and drive to an on-shore site and many near-shore sites. And even in the North America / South America situation, while we still don’t have a complete Pan-American highway (as we still have the Darien Gap), we do have complete connectivity in North America and in South America, and if trade were to increase, it would make a ferry service from Panama to Colombia financially viable, and trucks could be ferried from Port Panama City to Santa Marta (and cars as well, although there is already a weekly service from Colón to Cartagena that could be expanded to operate more frequently). This means that you could get goods from any country county in South America into the US mostly by land in 2-3 weeks, or get to a supplier site by land in the same time. However, suitable partner selection could get you, or your goods, anywhere mostly by land in less than a week! (So, during normal times, imagine how fast and easy air travel will be — without racking up huge, unnecessary, overseas travel miles.)

Cultural Understanding

Most countries have a better understanding of their neighbours (unless it’s a communist/dictatorship with completely closed borders) than they do of countries half a world away, which usually makes collaborative working relationships naturally easier.

Complexity Reduction

The further away the good, the more complex the sourcing. There’s enough complexity to deal with in modern business. Why increase it? Especially since there is NO Big Red Easy Button (and Gen-AI definitely WILL NOT deliver one)!

Back to Basics

And, finally, when you onshore home-source or near-source, you’re getting back to basics. If you look at the history of trade, which was always long, risky, and costly, you traded for what you did not have locally, not what you had.

Convincing you that off-shoring was a good business decision that would save you money was one of the biggest cons, if not the biggest con, that the Big X Consultancies ever pulled off, since, in the long term, the only organizations that will make any money in the end are them*.

These Big X Consultancies charged you a lot of money to help you off-shore (which involved identifying suppliers, managing global supply networks, redesigning processes, updating inventory management, dealing with more defects and quality issues, etc.), which took you years to recoup before you started making money … which you have to give them again so they can help you re-shore, which requires identifying new suppliers (because even if your systems have data from pre-offshoring times, chances are those suppliers are out of business), redesign your supply networks (as you need different carriers, new warehouses, new partners, and new regulations to adhere to), updating inventory management, and temporarily dealing with defects and quality issues as the new suppliers evolve to support you. After all, any staff who knew how to deal with near-shoring (as well as handle trade in a time where there were few recriprocal agreements, tariffs were everywhere, logistics was a nightmare, etc. … i.e. pre 2000s, retired during / post COVID when they decided they had enough as a result of your “temporary” furloughs, forced office returns, and/or headcount rationalization in favour of new “AI” systems that don’t work.

If you had just stuck to the basics, and instead of going half a world away for a quick win, invested in process, product (design for cost/reuse/etc.), manufacturing, inventory, and logistics optimization, chances are you’d be far ahead now while the rest of the world scrambles to catch up.

*Today’s soundtrack: Bullet with Butterly Wings

Dear Sourcing/Source-to-Pay/Procurement Founder: Please STOP Making These Mistakes! Part 3

In Part 1, we reminded you of the 12 best practices for success that we published last year and noted that, since this obviously wasn’t read enough (or properly) understood, as the doctor is still seeing founders make the same old mistakes year after year, he needed to do more. So, using his 18 years of experience as an (independent) analyst and 20 plus years as a consultant, during which he has researched and/or engaged with over 500 companies, of which 350 were publicly covered on Sourcing Innovation or Spend Matters (between 2016 and 2022), he’s decided to make plain at least 15 of the same mistakes he has seen over and over again, in hopes that maybe he can prevent a few founders from making them again.

Then, we covered the first four (4) of the 15+ mistakes we promised you, namely:

  • Assuming that because you were a CPO, you don’t have to do your market research. (Part 1)
  • Assume you can serve any company that shows interest in your product. (Part 2)
  • Assume you can go for disruptive or innovative first. (Part 2)
  • Assume you can take Tech Shortcuts and Fix It Later. (Part 2)

If the mistakes stopped here, we’d be done. But they don’t. So, today we’re going to cover the next two.

5. Assume that because you could run a Procurement Department that you can run a SaaS company.

When it comes to founding, running, and building a SaaS company, there are many truths you need to be aware of, including these four that are among the most critical:

  1. Using SaaS/software is not the same as building SaaS/software.
  2. Running a Procurement Department is not the same as running a Technology Company.
  3. Most importantly, running a SaaS company day to day is different from selling a SaaS company day to day and, most importantly,
  4. Growing a SaaS company is NOT the same as running a SaaS company!

What you need to understand is:

  1. effectively building SaaS and running a SaaS company takes mad tech skills, not just mad domain knowledge and mad management skills (remember, tech is the doctor‘s area of expertise)
  2. in Procurement you’re buying, in Tech you’re building; you’re managing architects and developers and testers, not process owners and users and stakeholders
  3. you don’t just need to build a solution, you need to sell, sell, sell it; remember, you were a buyer, NOT a seller (or a marketer or a demand generator etc.)
  4. you don’t just need to sell; at some point you will also need to raise money so you can scale (or at least take on some debt) … where your former peers are concerned, if you can make them happy and show them an ROI they believe, that’s one thing; but even getting the attention of an investor is another, and then keeping them interested through a pitch for a follow up conversation, then getting terms, and so on … and at the same time you either have to progress up the enterprise food chain in the pipeline or significantly increase the number of real prospects in the pipeline to keep those investors happy

It take s a lot to build a successful startup, and typically a lot more than a founder will even think of when they take the plunge. (For a very good overview, the doctor will again remind you that he recommends Garry Mansell‘s Simplify to Succeed.) And the reality is that most of us don’t have all the skills to be a successful growth CEO (and, more importantly, are much better suited to excel at other CXO roles and do an above average job when we are in those roles best suited for us). Thus, it’s critical that

  • you understand your weaknesses and bring in people to fill the gaps until
  • you are big enough to
    • add the right full time roles and
    • headhunt and hire your replacement (and step into the CXO role you are best suited for)

6. Assume you know the average process and technology competency in your potential customer base.

There’s a reason that best practice #6 was to understand your current customer process and typical restrictions and that’s because not all of your potential customers are at the same stage in their journey, and, more importantly, they might not all be similar to your experience. If your company was behind the curve in your vertical, you will need to develop more than you think to be relevant to your industry, and if your company was ahead of the curve, you will need to ensure your technology is as easy to learn, integrate, and use as possible. Even easier and more accessible than you thought when you started out. It may even need to disappear into their process entirely (with a lot of configurable automation). Every provider wants to be the portal the customer logs into every day, but while a company may need a dozen providers, there can be only one that provides the portal. (And if the portal doesn’t solve the key problem, it won’t necessarily be the most valuable solution. Remember, ERP isn’t sexy, but ERP and Big X consultancies get the biggest tech-related checks every year from traditional tech-consuming organizations.)

And while we still have many mistakes to go, we’ll stop here for today. Come back for Part 4.

We Need to Hasten Onshoring and Nearshoring — the Drivers Will Pound Those Who Don’t Into the Ground! Part 1

It was great to see a recent article on Supply Chain Dive on 6 reasons why global supply chains are shifting because the unending list of disruptions, cost pressures, and geopolitical tensions are only going to get worse.

According to the article, the following factors are influencing the decisions — and the doctor encourages you to read the article as he’s not going in depth into anything already written, especially when it was written very well, but instead wants to emphasize why the global outsourcing craze (that he has been rallying against and complaining about for over 15 years, since he saw the business case begin to crumble in the late 2000s) was, and is, fundamentally wrong (and emphasize even more factors you may not be considering yet).

Landed Costs

Items have become more expensive as supply constraints on certain raw materials and food stuffs have significantly increased prices across the board, tariffs and taxes from protectionist policies have heightened prices further, and then the skyrocketing logistics costs during the pandemic and now due to canal crises (Red Sea, Panama, etc.) and the lengthened shipping routes around the Capes (Horn and Agulhas) they are introducing make farshore sourcing very expensive.

Nearshoring from Mexico or Central America can take two weeks off of delivery time and reduce landed cost by up to 20% from the average. On the flip-side, sourcing from China with “trade war” tariffs (that Trump is threatening to increase) can increase landed cost by 20% (as section 301 tariffs targeting China added a 25% duty on hundreds of products).

Tariffs And Subsidies

These trade penalties and incentives are flying fast and furious both in populist-run democracies/republics/parliamentarian systems with Our-Country-First policies and communist/dictatorship countries with protectionist policies or tit-for-tat trade-war tariff and incentive policies. This makes “neutral” countries the best choices for outsourcing. See the article for a great breakdown of import value trends as a result of these changes in tariffs and incentives.

Geopolitical risk

The trade-wars were just the start. Now we have the Russia-Ukraine War, the Israeli-Palestine conflict, the war in Sudan, increasing tensions between China and Taiwan, and so on. All of these have, and will, disrupt global sourcing. The global political trade risk in multiple countries is now significantly high.

Existing Supply Networks

Even though, for North America, China came at the cost of Mexico, the trade networks still exist, and are easy to ramp up again. Similarly, multinationals already have hubs in multiple countries they sell (a lot) in and re-orienting around those hubs is easier than finding new hubs half a world away. Moreover, reducing routes increases FTL/utilization of key routes, and allows for logistics optimization.

Agility

Extended supply chains mean extended ocean shipping times, congestion at ports and warehouses, increasing labour disruptions (which is the biggest supply chain threat right now), can create lead times that stretch into months when we want to operate in a near JIT (just in time) manner, and get restocks in days (or weeks at most). Nearshoring can often allow that. Offshoring (unless it’s very small components you only need a small number of that can fit in a cargo plane and where the cost is so high you can afford the high air transit prices) can not!

ESG Goals

Shipping takes fuel. LOTS of fuel. LOTS of dirty petroleum-based fuel. Hard to make your ESG targets when ocean shipping is one of the dirtiest industries on the planet when there are still container ships on the ocean that, in one year, emit the same amount of cancer and asthma-causing chemicals as 50 MILLION cars. (Link) Remember that 6 of the worst polluting container ships can pollute more than ALL of passenger vehicles in the US in a year. (And don’t tell me that electric cars will fix all that when the production of a single battery pack, which often requires burning dirty coal or oil, for an electric car can produce up to 16 metric tons of CO2 [Link] and charging that battery from a dirty coal power plant can result in the indirect burning of 950g of CO2 per kWH, meaning you could be producing 78kg of CO2 every time you fully charge your battery pack for a Tesla 3. This means that, in the worst case scenario where the battery and frame production was as dirty as possible, you would have to drive 1,000,000 kms for that clean car to become carbon neutral!)

And while these are most of the major reasons to consider nearshoring and onshoring (but not “friend”-shoring, but that’s a different article), there are others. And we will discuss them in Part 2.

Dear Sourcing/Source-to-Pay/Procurement Founder: Please STOP Making These Mistakes! Part 2

In Part 1, we reminded you of the 12 best practices for success that we published last year and noted that, since this obviously wasn’t read enough (or properly) understood, as the doctor is still seeing founders make the same old mistakes year after year, he needed to do more. So, using his 18 years of experience as an (independent) analyst and 20 plus years as a consultant, during which he has researched and/or engaged with over 500 companies, of which 350 were publicly covered on Sourcing Innovation or Spend Matters (between 2016 and 2022), he’s decided to make plain at least 15 of the same mistakes he has seen over and over again, in hopes that maybe he can prevent a few founders from making them again.

Then, we covered the first of the 15+ mistakes we promised you, namely:

  • Assuming that because you were a CPO, you don’t have to do your market research. (Part 1)

If the mistakes stopped here, we’d be done. But they don’t. So, today we’re going to cover the next three.

2. Assume you can serve any company that shows interest in your product.

If you recall, best practice #1 was to identify the market sector you are competing in and best practice #3 was define your target industries because you can’t be everything to everyone. More importantly, if you try, you will fail miserably chasing every deal, building features your ideal market has no interest in (and that can’t compete with other companies already there), and wasting time and money for naught (as you will close very few deals this way). In order to compete, you need to do something very well, and better than the majority of your peers, not do the 60% solution from a number of competitors.

3. Assume you can go for disruptive or innovative first.

It doesn’t matter what great new feature your product has or how innovative or disruptive it is if you don’t solve one or more of the customer’s core problems AND have all of the baseline functionality required and expected for a product in the category you are selling in. For example, in sourcing you need to have very extensive and configurable RFX functionality as even e-procurement platforms have simple RFP now. Supplier Management needs to be able to not only store any information of interest about a supplier (extensible and organizable/tagged into categories), but support a more specific organizational need around simplified Procurement (especially in direct where you need to replenish quick after contracts), compliance, risk, or program management. e-Procurement has a whole host of requirements around PO (compliance), catalog support, order acknowledgement, approval requirements, etc. (And in our Source-to-Pay+ series we did overview a lot of the baseline requirements for core modules.) The reality is that when it comes down to a face-off evaluation, if your solution doesn’t check core boxes, you won’t get the deal, even if your functionality, usability, and customer commitment are far superior.

4. Assume you can take Tech Shortcuts and Fix It Later.
There’s a reason that best practice No. 5 was understand the data needs and design the full data model and that’s because if you take shortcuts, you will never get it right and you will never be able to fix it. You need to understand that every single line of code written without forethought and care will become technical debt the second it’s checked into the code repository, vs. technical debt five to ten years out when the language and stack you use is deprecated. If you start in the technical debt hole, you never get out of it.

Moreover, as per our last mistake, if you can’t capture the right data, no one will want your product, and if you can’t support the right process, no one will want your product. This means that, at the foundational level, you can’t take shortcuts. You see, just like you can’t build a 10 story apartment building on a foundation you poured for a two-story house, you can’t eventually build a best-in-class solution for an enterprise on a foundation that doesn’t even support a micro-mom-and-pop shop!

And while we still have many mistakes to go, we’ll stop here for today. Come back for Part 3.