Author Archives: thedoctor

The More Things Change … Supplier Intelligence

This week we’re revisiting posts from ten years ago to demonstrate that, to date, the more things change in Procurement, the more they have, unfortunately, stayed essentially the same.

Ten years ago we published a post on what you can’t afford not to know about your suppliers that summarized some key insights from Jim Lawton (who was VP of Marketing at Open Ratings until its acquisition by D&B, where he became SVP and General Manager of Supply Management Solutions).

Jim, who noted that global supplier insight can become as indispensable to sourcing and supply management as a stage is to an actor, also noted that in order to acquire this insight, an organization has to focus on:

  • supplier performance and quality management,
  • supply risk management, and
  • supplier content and connectivity

And nothing has changed. Any organization that wants to understand total landed cost from global markets and with predictability still needs these capabilities today. Considering that the the final cost of any purchased product is ultimately dependent on the supplier and its ability to delivery a product to spec on time and on budget with minimal defects, supplier performance management is as critical today as it was a decade ago.

Similarly, considering that a single disruption can wipe out the entire identified and negotiated savings on a category (as the result of a six week disruption), supply risk management still takes center stage. (This goes double when the chance of an organization not experience a disruption is 15% or less for any 12 month period.)

Finally, without an understanding of supplier policies, practices, and the providers your suppliers employ, you’ll never know whether or not they are adhering to your corporate social responsibility standards, whether or not they are implementing six sigma and other best practices to ensure quality and keep defects down, and whether or not they are buying from, or subcontracting component development to, third parties that don’t adhere to your quality, responsibility, or ethical standards.

Supplier Intelligence is as important now as it was then, and, most importantly, many organizations don’t have the depth of intelligence they should have, as evidenced on the relative lack of uptake of modern Supplier Relationship Management solutions.

The More Things Change … Outsourcing and Procurement Mastery

This week we’re revisiting posts from ten years ago to demonstrate that, to date, the more things change in Procurement, the more they have, unfortunately, stayed essentially the same.

Ten years ago we penned a post on outsourcing and procurement mastery that summarized the results of an Accenture study that found that, on 1B of controlled (normalized) spend, procurement masters achieved 30% higher savings with costs that were 50% lower.

Nothing has changed. If you have been following the Hackett group publications for the past decade, you’ll note that top performers always perform significantly better than average performers. Maybe not 30% cost reductions, but pretty close. For example, in Hackett’s most recent study, World Class Procurement organizations see 35% process cost reduction, which is quite significant. And just about every GPO publishes typical category-based cost reductions in the 10% to 30% range, which is easily achievable through advanced sourcing technologies such as spend analysis (to identify the opportunity) and decision optimization (to capture the opportunities).

The only thing that has changed is how disturbing it is that there is still so much overspend in the average organization — and how easy it is to identify it. By now the majority of organizations should own advanced sourcing and procurement technologies and be identifying the majority of these savings on a regular basis. But it’s still not the case. Over 40% of organizations don’t have a single modern sourcing or procurement solution.

We’re still way behind where we should be. In this regard, unfortunately, nothing significant has changed in a decade.

The More Things Change … Global Product Development

This week we’re going to revisit posts from ten years ago and demonstrate that, to date, the more things change in Procurement, the more they have, unfortunately, stayed essentially the same.

We’re starting with a piece we published a decade ago on the benefits and risks of global product development. In this piece we noted that while the risks of global product development are many, so are the benefits as outsourcing can often open the organization to talent pools it wouldn’t have otherwise.

However, as we pointed out, the benefits won’t materialize if the risks aren’t mitigated, as any risk can destroy an entire sourcing and new product development plan. And the strategies for mitigating risk, as identified in the original article, are as relevant today as they were then.

NPD (New Product Development) still requires product road-mapping and portfolio management, iterative design and validation, product architecture and system design across the value chain, knowledge management so nothing gets lost, IP management, talent management, and, most importantly the right Product Lifecycle Management platform.

Without an integrated platform to track what is coming from where in the supply chain, who is doing what, what events are occurring, which of those impacts could cause a disruption, and what the potential (cost) impact could be, the organization is literally flying blind.

However, we still don’t have one platform for NPD that also manages end-to-end supply chain risk. And this is risky business. We have great platforms for NPD and product costing (including, but not limited to, Apriori, I-Cubed, and Supply Dynamics) and great platforms for risk identification and management (Achilles, Resilinc, and Risk Methods) — but not an integrated risk-centric new product design platform.

The missing strategy is still missing. Will it finally materialize ten years from now?

Great Supply Chain Jokes from the Last Decade

In preparation for the week ahead, SI has decided to publish some of its favourite supply chain jokes. Some are a bit brash (and maybe even offensive), but sometimes that makes a good joke.

3. Demand forecasters are like Slinkies. Not really good for anything, but you still can’t help but smile when you see one tumble down the stairs.

2. If you’re a supplier and you think nobody cares if you’re alive, try missing a couple of delivery dates.

1. What do you get if you play a supply chain country song backwards? You get your revenue back, you get your margin back, you get your on-time delivery back …

Digital Disruptors or Digital Disruptions? Part II

Kinaxis recently published a post on “8 digital disruptors” that are coming soon to your supply chain. But, at least as far as SI is concerned, hopefully not too soon. While they all pose promise in theory, the reality is that it’s going to be a while before they deliver in practice. And while the doctor doesn’t like having to play the role of the grumpy old man who keeps shouting get your tech off my lawn sometimes he has to as no one else will. The reality is that some developments should stay in the world of sci-fi, at least for now. Today we continue to take them one by one.

Drones

The promise: reduced last mile logistics, especially for consumer sales

The reality: GPS errors result in crashes and lost deliveries, hacking results in stolen drones, jamming results in chaos

Autonomous Vehicles

The promise: faster, safer, cheaper transportation

The reality: bright lights blind the sensors and crashes result in lost inventory and lawsuits, hacking sees your truck disappear, inability to recognize report to weigh scale signs leads to reports to the highway patrol that leads to police chases when the trucks don’t pull over which leads to road closures and military strikes when they get labelled as terrorist controlled

Virtualizing Expertise

The promise: augmented reality makes workers more efficient

The reality: too many metrics and graphs and displays distract workers, who actually become more inefficient and more prone to workplace injury; hacked VR goggles lead to more lost productivity as workers watch youtube all day; and bugs that allow for code-crossover cause a few employees to freak out as Pokemon suddenly pop out at them on the production line

Artificial Intelligence

The promise: the computer does your work for you

The reality: the computer does something for you, but generally not what you’d expect or want … and then it becomes sentient, and realizes it doesn’t need you at all …

And yes, the doctor realizes that:

  • the drones could be limited to short range deliveries, protected with multiple level of encryption and firewalls, augmented with sensors and local terrain maps, but it’s not long before the cost to serve is well beyond just using the local post
  • the vehicles could be pre-programmed with all weigh scale locations, programmed to recognize emergency vehicles, pull over, and broadcast a message to call the dispatcher, but what if the truck needs to be opened for an inspection, or the ambient noise presents a siren from being recognized
  • the goggles could be fixed to be push display only, toggled on and off by the user, and so on … but that’s just not enough, many workers can barely handle reality some days
  • the user could be asked to confirm all decisions, but that defeats the purpose and once the AI becomes sentient …

As we indicated yesterday, none of these technologies are anywhere close to prime time and given all of the current weaknesses in supply chain software and integration between various systems with limited integration options across platforms, this is not a situation that’s going to change overnight. And the potential magnitude for loss is that just one failure could wipe out a year of (anticipated) cost reductions … or more. Not to mention brand damage if your drone crashes into a school bus, your truck crashes into a school, or your AI decides that it’s going to import only blood diamonds from Africa and use your organizational funds to benefit insurgents and terrorist regimes.

Sometimes the grumpy old man is right. Get (that drone) off my lawn!