Author Archives: thedoctor

Your Successful Supply Chain will NOT be Autonomous!

the doctor has recently seen a few pieces out there on the forthcoming autonomous supply chain and even a few pieces on the “self-driving” supply chain. Eek! Just like we’re not ready for AI-enabled self-driving cars that will drive us off a cliff as soon as they become self-aware (and that’s why you can have Carl and I’ll stick with Alfred), we’re not ready for self-driving supply chains that “predict” future demand, automatically order large numbers of products for you, and push them to local warehouses and retail stores without any human intervention.

Just because your demand sensing engine, which works well for established products, can use PoS data and other demand signals to auto-reorder staples with 98% accuracy doesn’t mean it can predict the success of an upcoming, or relatively new, product line — especially if it’s new for your business and you are, unbeknownst to your sensing engine, about to be beat to market by your nearest competitor — and it’s in the consumer electronics industry where first to market typically captures 10% to 30% just for being first. The last thing you want is for the platform to increase your initial order by 30%, ship straight to store, and then have it sit there for six months, and depreciate. Not a good use of cash.

Nor do you want your TMS automatically assigning shipments to carriers, intermediate warehouses, and ports without any human intervention. Software with limited data feeds often have no forewarning when a port might shutdown due to a strike, but humans might. Nor will a limited feed software algorithm know when a border might close and also close a supply route. But a human might. And so on.

And, despite what Amazon may think, you definitely don’t want to be thinking about anticipatory shipping. As we noted in our post five years ago, while predictive analytics is getting better by the day, it’s still hit and miss at a granular level. And individual purchases are quite granular. Just because 4 out of every 5 people who buy a Buzz Lightyear Cup also buy a Sheriff Woody Saucer, doesn’t mean the 4 people that your “AI” chooses will. One of them might not like saucers. Or Sheriff Woody. Shipping on an anticipatory nature guarantees that at least one out of every 20 units will be unwanted, and as many as one out of every 4. That’s a lot of returns. And, as we have noted again and again, including our recent article on how there is no free lunch, and there is no free shipping either, that could get quite pricey. How are you supposed to keep costs down if you have to budget for amortized high, wasted, return shipping costs across every unit?

So please, please, don’t try to give your supply chain autonomy. Automate it. Apply the best assisted intelligence solutions on the market to provide one-click recommendations, but always make sure there is a human check before any decisions are made that affect millions of dollars.

The Storm Clouds Are Still Here!

Twenty years ago, enterprise software was installed on-premise and managed locally. This required organizations with no knowledge of IT or IT management to create IT departments to manage servers and the software services that ran on them. For an organization that didn’t use software in it’s daily operations — such as a manufacturing organization that used manual production lines, an advertising agency that deals in existential image and not physical product, or a real-estate agency that only has to take listings and take cheques — it was an expensive proposition.

Then came the Application Service Providers, better known as ASPs. Using the power of the internet, these software solution providers built their own data centres and hosted the solution for their customers on dedicated machines in their own data centres. However, this solution was not optimal either, as the organization was not only paying for machines, energy, and administrators to run the software, but also paying for these through a third party that added overhead and markup.

This provided an opportunity for more enterprising software delivery organizations that were able to build their applications to be multi-tenant and host multiple clients on the same platform. This reduced the number of machines, kilowatts, and system administrators that were required and thus reduced the overall operating cost. This allowed this new breed of Software-as-a-Service (SaaS) vendor to take business away from the ASPs and advance the state of the art.

But this wasn’t the end. New enterprising software delivery organizations, who realized that their expertise was software and not data centre management, decided that they could do even better if they designed multi-tenant Software-as-a-Service solutions that could be run on someone else’s platform. This would bring more economies of scale into play as not only could multiple solutions could be run on the same platform, but the platform provider could be replaced by another platform provider with a lower-cost at any time. Enter the Cloud, which, like a real cloud is ephemeral, suspended in space, and, in some cases, full of security holes.

Cloud services are ephemeral as any specific instantiation of cloud services last as long as the company behind it has the means and the desire to continue supporting the cloud services. Cloud services are suspended in space since the instantiations may move over time as the service owners switch to lower-cost and/or more secure data centres. And, the cloud is full of holes. Massive holes that can swallow even multinationals whole. Nothing has improved since the the revelations on the PRISM program five years ago when the EU Parliament has called for suspension of the multi-billion ‘Safe-Harbour’ deal over NSA spying because some cloud providers don’t, either because they don’t have the expertise or won’t spend the money, secure their part of the cloud properly. For example, the recent Marriott hack compromised 500 million accounts. That’s absurd.

As a result, supply chains are continually exposed to additional risks of disruption (if a cloud provider unplugs overnight), security breaches (as some platforms are significantly less secure than others), and privacy risks (as some governments claim the right to all data on servers on their shore that is not associated with citizens or entities of that country or that might pose a security risk under acts like the US Patriot Act).

And most companies choose to remain blissfully unaware of the fact that a relatively significant software-as-a-service provider could go dark overnight or that their major cloud-based ERP or S2P provider could be hacked, exposing all of their trade secret company information, private banking information, and personal employee data — potentially subjecting not only the provider to massive fines but them to law suits, wire theft, and additional fines.

In other words, when you are assessing, and preparing for your supply chain risks — don’t forget the information chain. It can disappear with the literal flick of a switch.

One Hundred and Forty Years Ago Today …

Sir Sandford Fleming first proposes adoption of Universal Standard Time at a meeting of the Royal Canadian Institute and gives the world a way to plan and execute global communication and scheduling on a reliable basis and revolutionizes the measurement of time for the modern age. (In stark comparison to George Hudson who proposed Daylight Savings Time 16 years later in an attempt to take the world back to the Dark Ages. How good can an idea be if its primary proponents ended up being the German Nazis???)

And while the global community is still arguing over the best implementation of UST– whether UT0, UT1, UT1R, UT2, or UTC is best — the simple fact of the matter is that UT1 is good enough, and thus UTC is good enough, and the world should just adopt it and quote all times in UTC.

Supplier Management Is Not Enough. But Neither is Enablement. So What Is?

Very good question.

As per our post two years back on how it’s time to go beyond supplier management (which has been a thing every since Aravo burst onto the scene way back in 2003), supplier management is a lot more than just information tracking, performance metrics, and simple compliance requirements.

As per our last post, it’s also:

  • Corporate Social Responsibility (CSR)
  • Supplier Information Management (SIM)
  • Sustainability Initiatives
  • Supplier Development
  • Risk Management
  • Compliance

and

  • (Supplier) Contract Management
  • New Product Introduction
  • Maintenance, Repair and Operation (MRO)
  • Services and Service Management
  • (Supplier) Spend Analytics

but it doesn’t stop there. There’s also:

  • Supplier Discovery
  • Supplier Financing
  • Supplier Marketplaces
  • Supplier Networks
  • etc.

And then there’s the fact that the organization needs strategic and high performing suppliers, and most won’t make the cut until they are enabled. But just enabling a supplier to do better (one time) is not enough — you have to be able to take advantage of that enablement. Which means you have to be able to monitor, plan for, track, utilize, and respond to the changes made by the supplier. That requires a fairly advanced system.

And, as per our previous article, you need visibility (into the supplier and its supply chain); value-driven design (that produces a product a consumer wants); and verocity (for real time spend insight). But that’s not everything. You also need vetting (so that you can insure regulatory and compliance requirements are met); variability (as different suppliers require different levels of management and insight); and vindication (objective measurements over time that you made the right choice). And so on.

We still don’t have the answer, but we do know that the platform must be more than just information management, checkbox tracking, and messaging with audit trails. It must be collaborative, open, flexible, and evolving. Then, maybe in a few years, we’ll have a better idea of what the right answer is really is.

So You Need a Sourcing Platform That’s Next-Gen To You. Where Do You Start? Part III

In Part II we noted that there’s no single right answer or easy answer here as it’s very situational. And even though some consultants will always tell you to start with Sourcing and others with Procurement, they’re obviously not always right. Sometimes both are right, but usually neither are right. Because sometimes you start with Supplier Management. Other times you start with Contract Management.

But, in fact, absolutely speaking, neither are right. You start with analytics and strategic situational analysis based on analytics to figure out whether the problem is:

  • you can’t do enough sourcing events
  • your events are generating limited returns
  • you can’t find the right suppliers
  • you have to (quickly) ensure compliance with a newly introduced regulation
  • your over-spend, and need for audit recovery, is too high
  • your maverick spend is too high
  • you need to get your services spend under control
  • you are unsure of where your best opportunities lie

or

  • your suppliers are under performing on quality and related metrics
  • your deliveries are regularly late
  • your (internal) customers are unable to get the information they need when they need it
  • Finance is taking regular hissy fits about lack of timely cash flow insights
  • etc.

More specifically, you start with analytics on:

  • spend
  • (spend vs) contracts
  • cashflow and discounts
  • event throughput
  • performance metrics
  • inventory and logistics

Only then can you understand how the organization is performing and where it’s biggest problems lie. An analysis of spend might find that maverick spend is high, but the estimated overspend is at most 4%, but poor payment processes are actually costing the organization 4% interest (because it signed contracts with late payment penalties) as well as a 2% savings opportunity as a result of lost early payment discount opportunities (which it can afford as the majority of its customers pay on time). In this situation, while the organization might be tempted to get an e-Sourcing or catalog application to help reduce maverick spend, it should actually start with an I2P system to get invoices and payments under control. And so on.

Remembering that big bang implementation efforts always result in a very destructive big bang, do the analysis and start with the right platform application. Then, add one by one based on problem severity until you finally have a full end-to-end S2P platform implemented and utilized on a daily basis, which could be 18 to 36 months in the future, no matter how fast that SaaS vendor can flip the switch.