Category Archives: Best Practices

Finally! A “Think Tank” Article that Gets It Right!

the doctor has been reading a lot of “think tank” and “thought leader” articles lately that are completely off the mark. Some are so bad that he’s wondering if the publications are paying interns who know nothing about the space to use “chat j’ai pété” (Chat-GPT) to hallucinate content for them. (And, as you’ve seen, some are so bad and/or make him so angry that he just has to rant about them. Our space don’t get no regard at all as it is. The last thing we should be doing is providing anyone who takes the time to read about it with misleading or wrong information).

All that being said, Supply Chain Brain recently published an article on 2024 Predictions: A New Era of Strategic Supply Chain Design by Donald Hicks, the CEO of Optilogic. In it, he makes six predictions for the new era of strategic supply chain design in 2024.

The first five predictions were good.

1. A shift from short-term to strategic thinking.

COVID demonstrated that we’ve reached the end of short-term JIT thinking, and the recent geopolitical turmoil since has only heightened that reality. Any company that wants to survive has to go back to focus on mid-to-long term strategic thinking that will help it mitigate the plethora of risks it is being hit with and assure supply.

2. An end of the age of unlimited cheap suppliers.

Especially since the majority of these were based in China. As the author notes, China-US relations are deteriorating fast and the Chinese economy is underperforming. Moreover, as a result of COVID, logistics are uncertain and considerably more expensive from China (due to less carrier space, as many ships were scrapped during COVID for insurance settlements, and the need to sail around the capes, due to the Red Sea situation and the prolonged Panamanian drought). So, companies need to start looking elsewhere, and since they let their best suppliers in Mexico and South America wither and die, there aren’t many good options at the moment.

3. Demand for vendor transparency.

In addition to customers becoming more discerning, as the author notes, there are more supply chain regulations that need to be adhered to globally, more sustainability regulations, more denied party regulations, and so on. Companies need to know who they’re dealing with; that all supply chain, sustainability, and regulatory requirements are met; and that any desires of its customers can be met.

4. Market turmoil and the rise of new leaders.

This year is projected to witness down rounds, market turmoil, and a reassessment of strategies. Most definitely. VC went too hot and heavy before COVID trying to force unicorns where the foals weren’t even breeding stock, and then lost heavy in the SVB failure; and PE, trying to get a piece of the payments, online collaboration, and/or FinTech market during COVID paid ridiculous multiples for rather basic offerings that weren’t even complete — and that would never demand the price tag the investors expected. As a result, these PE firms are now looking at payback timeframes of a decade or more, if they’re lucky. This means that cash is sparse, investments will be sparser, and some companies (that overspent and can’t get the valuation) will not survive.

5. Digital Twin Skepticism.

Every supply chain technology vendor is clamouring to tell you about their digital twin capability, but the term “digital twin” is a marketing creation that can’t live up to its ambitious name. Companies don’t always have all the data (or quality data) relating to supplier orders and timelines, inventory levels and factory production in separate operational systems, much less a single location.

There’s no digital twin without complete data, and there’s no complete data. Modern manufacturing companies and direct buyers are figuring this out and not falling for outlandish claims anymore.

The sixth prediction was absolutely fantastic!

6. Artificial intelligence exhaustion, and a return to old-school evaluation.

Hear, hear! Smart companies are getting fed up of the ridiculous claims made by new Open/Gen-AI companies and the paltry results that were delivered, if any. They’re also fed up of the high-price tags relative to the limited value they’re received from “AI” so far.

Thus, rather than relying on the mere claim of being AI-enabled, companies should be expected to showcase their capabilities, substantiate their claims with proof, and provide clear reasons for belief, signalling the return to a more traditional approach to purchasing decisions.

Hear, hear!

We Need Integrated Business Planning (IBP); But it Won’t Work Without Proper Organizational Structure and Roles – And Definitely Won’t Work Without a CRO and CPO!!!

There’s been a number of articles lately, which we’ll likely discuss in later articles, about the need to move to integrated business planning (IBP) as a means to combat, and minimize, supply chain disruptions. While those articles have a point, there are two things they are missing, at least so far. One, while IBP can minimize certain types of preventable disruptions, it doesn’t help much in mitigating disruptions that are unexpected. Two, it requires end-to-end modelling of, and monitoring of, overall business processes, and without the right representation of the right stakeholders in the process, this never happens.

And the right representation usually doesn’t happen because, as we kind of hinted at in our last article on why You Need A CPO, most organizations don’t have the right C-Suite, and, thus, the right people aren’t included, or at least properly represented, in integrated business planning (IBP), and, as a result, the right processes, or at least the right assumptions and data, aren’t included, and the planning fails.

If you look at the goals of Integrated Business Planning, which include, but are not limited to:

  • aligning strategic objectives with operational and financial goals
  • aligning product strategy, R&D, and manufacturing with objectives and supply chain
  • ensuring demand forecasting is influenced by market research and historical sales data and connected to procurement
  • ensuring procurement strategy aligns with demand forecasting, risk management, and the organization’s current supply chain network
  • ensuring network and logistics changes and optimization takes into account procurement, risk, regulatory compliance, and ESG goals
  • ensuring marketing and sales focusses on current product availability and aligns with the product strategy dictated by market research
  • creating an all-inclusive profitability analysis that takes into account true end-to-end lifecycle costs
  • ensuring inventory is balanced with logistics times and disruption risk so that overall cost (balanced between inventory cost and losses from stockout) is the most appropriate for the organization
  • creating a cash-flow analysis that considers not only all inflows and outflows but the timings so the organization can balance debt/loans, on-time payments, early payments, and investments to maximize the return on every dollar

and the expected results which include, but are not limited to:

  • enhanced revenue growth
  • faster and better (data-informed) decision making
  • improved customer satisfaction
  • better product lifecycle management
  • faster supply chain disruption responses
  • increased target ownership and the ability to rapidly revise, and commit to, plans
  • better planning efficiency

you cannot

  • align objectives with goals unless you have the owners of all objectives, impacted operations, and finance involved … and this dictates a complete C-Suite with all the key parties, including, but not limited to the CEO, CFO, CPO, CRO, and, if present, COO, CTO, and any other CXO role NOT fully owned by another CXO
  • align strategy without the marketing & sales perspective (CRO), the market research (CRO or COO), the R&D/Manufacturing owner (COO or CSCO), and the procurement perspective (CPO)
  • you need the CRO, COO, and CPO to agree on the demand forecast as all parties need to deliver
  • … and the CPO needs input from the Risk Officer and the CSCO to finalize the strategy
  • the CSCO cannot optimize the supply chain network without the CPO, Risk Officer, Compliance Lead, and ESG Expert
  • the CRO needs to continually monitor input from the CPO and CSCO to ensure that products are marketed and sold at the right time as manufacturing challenges, logistics delays, inventory hiccups can change product availability daily
  • profitability needs to take into account all organizational costs, which means you need to look at procurement costs (CPO), operational costs (COO), HR costs (CFO, COO, or Head of HR), logistics and tariffs (CSCO), etc. it’s way more than revenue minus COGS minus overhead
  • and, while the cashflow belongs with the CFO, the CFO needs insight into organizational wide costs and commitments to figure it all out

and you will not

  • reliably enhance revenue without a CRO;
  • be able to make better data-informed decisions with missing data;
  • improve customer satisfaction without market research, procurement input, manufacturing quality;
  • better manage lifecycles without integrated input from market research to warranty repair and all steps in between;
  • respond quickly to a disruption without all of the integrated data to make an alternative decision as a mitigation response;
  • have all of the target, and task, owners in the same system; or
  • plan better with partial data. Never.

So you need all of the key roles, including the CRO and CPO that the majority of organizations are missing and, most importantly, you need the right structure — CRO and CPO at the top with the CFO and (if not done by the CEO) COO — with the other C-Suite roles reporting to the CRO, CPO, CFO, and COO as appropriate. For example, the CMO and VP sales under the CRO, CSCO and Risk/Compliance under the CPO, HR and R&D under the COO, etc.

In other words, all this push towards IBP is great, but you need a fleshed out, well oiled organizational structure, with all key roles filled, to support the processes with a collective holistic data view, or it just won’t work.

The Prophet‘s 2024 Procurement Prediction Number 10

A “CFA-like” Credential Emerges in Procurement and Supply Chain B+.

The Prophet says that the procurement and supply chain industries, similar to most others, excluding finance, are lacking any certifications/credentials, by those “in the know,” as a superior qualification for a job than even a top degree from a world-class or specialized university which is totally true.

The Prophet also says that organizations such as CIPS, ISM, SIG, etc., might disagree with this viewpoint which is also totally true. The Prophet does note that he supports all of these organizations, which the doctor does as well, and that he believes their training materials are highly valuable, which the doctor doesn’t across the board. (the doctor has seen some of their training materials. While some of their training materials provide a very good foundation, some of their training materials are not so good. Most of these organizations are very weak when it comes to analysis, tech-backed processes and practices, government/industry specific compliance requirements, risk management in today’s increasingly fragile global supply chains. etc. But when so many Procurement departments are struggling with the basics, understanding what their role is, and how ethics should enter the equation, we do need these organizations and that is why the doctor supports them while reminding you to do your homework when it comes to training. Use them for their strengths, not their weaknesses.)

The Prophet then suggests that in 2024, credentials will take on new meaning, and the best ones, particularly those challenging to obtain and requiring rigorous exams (which many fail), similar to the CFA in finance, will begin to take on a new significance in Procurement.

the doctor agrees with the principle, but does not agree it will happen this year, or even next year. Why? This will only happen with industry regulation, and that only happens in two situations.

  1. when an industry-led body gains enough support from the majority of professionals in an industry to make it a de-facto requirement in any employer of any size to get a high-level procurement job; no organization yet has that weight, and we’re not going to see the NLPA, SIG, APS, etc. all fold into the ISM, and definitely not into CIPS, which is pseudo-global (as it has made progress in some of the Commonwealth); this means that we’d need to see a new industry initiative that gave all parties representation and allowed them all to contribute to the standard and exam — for this to form, a certification to be adopted, and a test accepted will take years
  2. when a government forces a requirement that can only be met by a certification (and either creates their own or adopts one); governments move slow, and when we have the situation in the US where
    1. the republican focus is on ripping democrats apart for what they didn’t do, rolling back human rights to the fifties, and installing a wannabe dictator as President-for-Life
    2. the democrat focus is on shaming the republicans, selectively protecting the human rights they want, and taking up the former republican war mantle (since Trump just wants to be a dictator, which doesn’t profit the military complex) and doing everything they can to back Ukraine and Israel (including risking World War III with their Middle East bombing of Yemen vs. just destroying every Houthi vessel launched into the water)

    and the situation in the UK where

    1. the conservatives are too busy trying to keep Dishy Rishy from making them the laughing stock of the political world (as he’s so far disconnected from the common person he has no clue)
    2. the liberal (democrats) are too busy trying to counter the conservative support for the global wars and lack of focus on the situation at home by being extra woke (and we know how that fared in America) …
    3. when we look at the NHS mess and postal service mess and their apparent unwillingness to do anything meaningful about it (for longer than should be humanly possible to ignore a crisis), it seems that good procurement is the last thing on their mind

which are the two countries that would need to lead such an effort (as the EU is very focussed on climate change and AI and struggling to hold itself together now with active protests in about a third of its member states on any given day; heck it’s too focussed on attacking the farmers, already forgetting what happened when Stalin called the Farmers the enemy of the state. (See this article, for example).

Thus, while such regulation is sorely needed, it’s not likely to happen, if it happens at all, until the later part of the decade (unless, of course, The Prophet and the The Public Defender want to once again band together and take up the charge and lead the effort to bring all the necessary parties together).

The Prophet was dead on with three of the primary reasons we need it.

  • GPAs are no longer a measure of academic performance in many universities.
    The Prophet notes that, according to the Yale Daily News, “Yale College’s mean GPA was 3.70 for the 2022-23 academic year, and 78.97 percent of grades given to students were A’s or A-’s,” including the hard sciences and engineering! He also notes that the Michigan State Broad Business School (which includes the Supply Chain and Procurement degree programs) also experiences significant grade inflation, with 80% of students in 3 out of 5 undergraduate classes earning a 4.0. (Source)
    The situation is even worse in China where you don’t even get accepted to some Universities unless you are an A- or better student, and where you are under intense pressure to maintain that A, to the point where a student will drop out (or commit suicide) rather than risk being thrown out for not maintaining it. Now, this would be great except for the fact that As are often contingent on rote memorization and learning to do the work the “state way”, not always with any free thinking whatsoever. (And then graduating ONLY if they think you’ll agree to share what you learn when they allow you to go outside China for that Post-Doc/Professor position).
    The situation is better in Canada [except Quebec], but there are some Universities / Departments that are under great pressure to remain competitive to maintain grant and industry funding, and others where the professors are so overworked that they don’t even bother to confirm that a Master’s student in Engineering can manually calibrate an oscilloscope or a Master’s student in Computer Science can appropriately identify and test for all boundary cases in a simple procedure. (Remember, the doctor has been a Professor, and maintains regular contact with Professors and knows this to be truth.) How could you trust either to validate your equipment or your code? (He couldn’t!) (Regarding Quebec, the current premiere is taking Quebec’s status as a nation within a nation and essentially discriminating against anyone who is not French and willing to speak French as a first, and only, language. [See this article, for example.])
  • DEI/affirmative action preferences, which still exist (despite the supreme court ruling and their illegality if they enforce admitting or hiring a less qualified candidate), have removed objective academic criteria in both degree-based programs and industrial training programs. This has resulted in candidates who might only be a D being admitted to programs because of their minority status while non-minority candidates with Bs were excluded.
  • The best talent may no longer be pursuing traditional college or graduate programs. There needs to be an objective means of evaluating hard and learned skills for those who cannot afford or do not wish to invest time in university studies, especially those who have taken industry training programs or annex courses specific to what they need as well as obtained relevant real world experience under a mentor. (There’s a reason there used to be apprenticeships; some learning onlly happened under the guidance of a mentor.)

The only other reason that needs to be mentioned in the doctor‘s view is

  • without a certification, how can you know that any candidate, no matter how experienced and skilled they appear, knows all of the foundations you need them to know? With so many different definitions of sourcing, procurement, and purchasing; so many different thoughts on what an individual should know about analytics, supplier identification, supplier vetting/onboarding/management/development, negotiation, contracting, global trade, logistics, risk identification and management, compliance, finance / finance support, etc., how can we have a solid baseline with a (multi-level) certification program?

It would be great if 2024 is the year that we saw this certification, but while we desperately need it, the doctor believes that, unfortunately, it’s still years away. (But he will challenge The Prophet to step up and make it happen!)

It Was the Most Wonderful Time of the Year. Could it Be Again?

A couple of months ago we published an article on how ‘Tis the season … to bring an end to seasonality! (And JIT!) because, while consumer shopping may be seasonal, supply chains no longer support seasonality. The pandemic finally broke globally over-stretched supply chains and with the continued issues (lack of ships, due to scrapping; containers; due to trade imbalances; lack of capacity, due to extended shipping times now that the two major canals are not available and ships have to sail around both capes), the situation is not going to be fixed anytime soon.

In the article we noted that if you didn’t want to seasonally stock out, you needed to stop trying to stock seasonally and start planning for sustained stock up over time. Stock at the rate products are normally produced and able to be shipped. And stock to what you forecast.

But don’t stop there. If, even spacing out the orders and shipments, you can’t reasonably stock to demand, or, if the demand may not be high enough to minimize your logistics costs (via full container shipments), then you need to work on demand shaping as well as demand forecasting. Don’t over market / promote / sell a product you’ll have trouble delivering, and don’t maintain a product that isn’t going to optimize your economic order quantity.

Not everyone needs the newest product, or the top of the line product, some just need a product that works, which can be last year’s product, or the mid-line product. If you shape demand properly, through targeted marketing, targeted selling, or proper account management, you can make sure that you can meet all of your demand and keep each product line you should be maintaining profitable. And while we admit demand shaping can be harder than forecasting, sometimes it needs to be done. But it needs a lot of advance planning, so it’s critical that Procurement work hand in hand with Marketing and Sales to help identify the demands it can safely meet, when, and what demand levels are optimal for each product line. But if you integrate your planning, marketing, forecasting, sales, and supply chain planning, then maybe the holiday season will, in 2024, be the most wonderful time of the year.

Does Your Procurement Process Take Too Long, Maybe You Need to Zip Through It!

Zip is an interesting player. Started in 2020 to innovate the (lack of) intake in the Procurement world, they managed, through sheer ease of use and organizational friendliness, to embed themselves in a number of large organizations, get major investor attention, and, in less than four years, catapult themselves to a unicorn valuation.

However, as a result of those investments, they’ve been hiring good engineers as fast as they can find them, beefing up the orchestration, extending the product footprint (with baseline source-to-contract as well as some procure-to-pay capability), and launching a new integration platform, which is essential for source-to-pay-plus orchestration. They are making quite rapid progress in a space where many (but not all) larger companies have considerably slowed in their introduction of new innovation.

Marketing itself as procurement orchestration, Zip was founded to address the facts that:

  • purchasing is now distributed across numerous departments, and individuals, in today’s organizations,
  • (significantly) more cross functional approvals are required to control cost and risk, and
  • the ERP is not enough, and the plethora of apps and systems a modern organization needs are disconnected.

Now that they have powerful workflow creation capability, integration capability, and overall orchestration capability that can enable whatever you have (including Workday, Ariba, and Coupa), they now address the core problems they were formed to solve.

With the Zip platform, you can:

  • connect all individuals who need to purchase with all departments that need to be involved and vice-versa,
  • integrate all of the departments that need to review and approve purchasing (related) decisions, and
  • get visibility into each stage of the process across ALL of the organization’s systems (and even complete some tasks in the Zip platform where it has the corresponding Source-to-Pay capability).

On top of this you can:

  • integrate third party data feeds as well as applications to get insights and power analytics you need at any step of the process,
  • run cross-platform reports across performance and timelines as well as all spend, risk, and related data in the system,
  • manage your vendors and their data (which could be spread across a dozen systems) from one central viewpoint, and
  • manage your organizations (and subsidiaries) by department, category, etc.

The two-fold reason that you can do all this is because the Zip platform is really good at:

  • workflow management and
  • platform, and most importantly, data integration.

We’ll start with workflow management.

In the Zip platform, workflows are incredibly customizable. Workflows can:

  • have as many steps as required
  • which can be defined as sequential or parallel … and the workflow will not advance until all parallel steps are completed
  • have as many states as is needed (though most will only need a few states: locked, ready, in progress, approved, rejected (and sent back), rejected [and process terminated], etc.)
  • have as many sub-tasks and/or associated approvers as needed (so if the Legal Review needs two sign offs due to different policies that have to be met or the Finance Review needs two sign offs to ensure transparency, no problem)
  • have as many conditions as necessary for workflow selection / triggering (so you can have different procurement workflows by sub-category by geography if need be)
  • have as many triggers and dynamic data pulls defined as needed to instantiate a step once unlocked (e.g. bring up all vendors associated with a product, all approvers associated with a role, etc.)
  • link to as many external systems as required, with each (sub)task associated with the app/system in which the integrated party may perform his or her task
  • have as many details and associated documents as necessary
  • for Procurement, link to associated products, vendors, and / or contracts
  • etc.

And this is why the Zip Platform is so easy to use by, and attractive to, the average purchaser / requisitioner in an organization.

When an average user wants to buy, all they have to do is

  1. log into Zip via SSO (which can be configured to orchestrate organizational workflows beyond Procurement),
  2. indicate they want to purchase something
  3. select what they want to purchase
  4. make a few category/specification sub-selections to help the platform narrow in to the appropriate workflow (e.g. Facility Services, Janitorial; Computing and Electronics, Laptop;)
  5. if there are pre-approved vendors and/or products, the vendors/products; if not, they can select their own vendors/products
  6. answer a few [sub]-category dependent associated questions on the contract type, corporate or personal data that will be shared, etc.
  7. indicate the budget (amount) they wish to use (if appropriate)
  8. and submit the request …

The process is kicked off, the requisite data / document / survey collection is begun, those involved in the process are notified (and have visibility into the tasks they (potentially) have (coming), and the requester has full visibility into where the process is at all times (as the system will synch with external systems on predefined intervals between 15 minutes and 24 hours, usually depending on how often the external systems are used and what restrictions there are on access [e.g. some systems don’t have an API and do daily exports, and for systems with real-time APIs, the user can force synch anytime they want). But, most importantly, events that used to take hours to create and weeks to coordinate, can be created in minutes and the coordination effort is non-existent — the system handles everything for you.

When a user logs in, they can go to their (task) dashboard and see all the projects they are involved in, all the tasks they are assigned in those projects, and drill into all of the open tasks they need to work on now. They can also see how long the task has been open, when it is/was due, the average time taken on a task of that type, and the average time the user takes to do the task (if they drill into the appropriate report).

Moreover, if vendors are involved, vendors are invited and taken to their own portal where they see the event and only see what additional information is required (as anything requested upon onboarding is already available.

It’s also very easy to setup and administer, which is also critical for a modern platform. At any time, a user with appropriate authority can:

  • define, modify, and even inactivate workflows, as appropriate using a very easy to use no-code workflow builder where the users visually define the steps; select the actions; define the rules, actions, and triggers, etc.
  • define or modify (approval) statuses
  • define or modify the organization’s category hierarchy
  • define or modify new or existing survey templates which allow the user to add sections, questions, selection lists, etc.
  • create new system fields and documents and associate them with the appropriate system objects
  • create or modify the lookup types
  • add or modify user access rights, down to geographies, departments, workflows, function access rights
  • define or modify the organizational hierarchy (subsidiaries, departments, queues, locations, GL entities)
  • define roles, users, and permissions
  • define bank accounts and vendor (virtual) cards
  • add (out-of-the-box) or modify integrations, or launch the new low-code Zip Integration Platform that allows customers to build their own connector to any system with an Open (REST) API
  • define the default reports (vendor, spend, performance, etc.)

While we’re not covering them in this post, we should note that Zip has a P2P module (that 42% of its customers use) and a new Sourcing Module, and that Zip is actively working on new capabilities and module(s).

The new capabilities we can discuss now, on the Q1/Q2 roadmap, are:

  • NLP-based intake for even easier usability and up-front integration of Slack, Teams, and other collaboration platforms to allow workflows to be kicked off in those platforms
  • predictive analytics — the analytics module is being upgraded and it will include recommendations for spend management and process improvement using trend analysis, machine learning, and other techniques that can be used to provide the user with additional insight

In other words, Zip, which has well over 300 enterprise customers, is zipping along and intends to keep doing so. The great thing is that you don’t need to replace any of your enterprise systems, including any best of breed systems you have for sourcing or procurement, but instead connect them together to maximize the value you get out of them. Zip is an(other) I20 — intake to orchestrate — system that is certainly worth being aware of and checking out if system, process, or stakeholder orchestration and collaboration is a challenge in your enterprise.