Category Archives: Market Intelligence

Still No Love for the Oompa Loompas this Valentine’s Day

It seems the days of the oompa loompas are long past … as they have been on hard times for over a decade now. Not much has changed in the last ten years. They got no love then, they get no love now.

Just look at some of the headlines from the past year:

  • Feb 9, 2019 Child Slave Labor Rampant in Chocolate Supply Chain
    Sixty percent or more of the world’s cocoa is produced in the Ivory Coast and Ghana in West Africa. These countries are notorious for the worst forms of child slavery. An estimated 1.9 million children are engaged in forced labor on the Ivory Coast alone.
  • Jan 21, 2019
    Do you want slavery with that chocolate?

    Most chocolate has been through two separate supply chains before you buy it. The second chain is where a confectioner … buys bulk finished chocolate or chocolate components from one of the huge global companies that make these.
    The first chain is where these huge global companies buy cacao from farmers and make it into finished chocolate and components (cocoa powder, chocolate liquor, cocoa butter, etc.). It’s mainly the market in this first chain where the problem lies. Almost all of the sellers of cacao are little more than subsistence operations … the buyers can set the price. This extremely uneven market and other capitalist pressures have created a situation where the world has a huge demand for cacao, and yet the farmers who produce it cannot possibly pay
    (or earn) a fair wage at the prices …
  • Jan 9, 2019 Chocolates, caramels might be contaminated with hepatitis A, FDA warns
    Candy sold by a Kentucky company and QVC is being voluntarily recalled for fear that it might be contaminated with hepatitis A, according to a U.S. Food and Drug recall notice.
  • Nov 30, 2018 Global chocolate supply chain tainted by abuses in Brazil
    The global chocolate supply chain is tainted by the use of cocoa from Brazilian farms where human rights violations are common, a report released Friday said. Among the abuses detailed are farmers forced to work off debts to landowners or in degrading conditions, as well as thousands of instances of child labor.
  • Nov 06, 2018 Taiwan finds pesticide in organic chocolate from France
    Taiwan stopped a batch of organic chocolate from France at the border because it contained an excessive level of the pesticide Piperonyl butoxide. The substance was listed as a low-to-medium-level toxic material, likely to raise the possibility of liver cancer in animals.
  • Feb 15, 2018 Cadbury Caramilk chocolate comeback tainted by product recall
    A “limited number” of Cadbury Caramilk chocolate blocks have been recalled just two weeks after the retro treat made a popular comeback to Australian stores earlier this month. All Caramilk 190-gram blocks … have been recalled due to a number of products found to contain small pieces of plastic.

The continued plight of the oompa loompas is very unfortunate considering that many studies have found that (dark) chocolate is good for you. Now, ten years ago we said you should be rewarding the oompa loompas for their hard work, but considering that even if they are working hard and not using slave (child) labour or tainted chocolate, we can’t be sure that the producers they are buying the raw cocoa from are even remotely ethical.

They still deserve a a little love, but they also deserve some new job opportunities. They work hard, and it’s not their fault everyone else is less ethical than them.

Where’s the Beef Coming From?

As with last year’s post with the same name, this isn’t about the beef supply chain, or the purity of the beef that you source, but yet another post about the pitch. We’re latching onto Wendy’s classic catch-phrase because it’s easy to remember and one that you should never, ever forget! Especially when you are being sold something that sounds better than it is, or what you are being sold is better than what you expect from the organization providing it.

Why must we talk about this again and again? Because it’s too easy to get suckered into a deal that is too good to be true or without substance. It doesn’t matter how big and fluffy that sesame seed bun is, how fresh that lettuce is, or how juicy that tomato is if there is no hamburger patty or the hamburger patty is mostly seaweed.

As proof of how easy to get suckered in to something that sounds better than it is, we point to the news (no, not the fake news) and the new round of coverage of the Fyre Festival fiasco as a result of recent documentaries which highlighted how hopeful attendees promised luxury meals, lavish accommodations, and the music festival of a lifetime got pre-packaged sandwiches, FEMA rescue tents, and the sound of the sea.

But it’s not just crooked festival promoters you have to look out for. It’s also sales reps who will send you their top-of-the-line product as the “demo” from their brand new factory when you actually get the bottom-of-the-line knock-off produced in their most outdated factory which has a 50/50 chance of short-circuiting when you flip the power switch. Or consultancies that trot their junior partners and senior talent in during the dog-and-pony sales show for your big platform implementation / customization project but then switch them out for recent college grads with no experience in your industry when you sign on the dotted line (as the junior partners were just the “project advisors” who don’t actually do any of the work). Or domain experts who scrape content from industry expert sources (like Sourcing Innovation and Spend Matters), repackage it, and pretend it’s their own and sell you niche advisory sourcing or I2P management services they actually know nothing about.

In other words, it’s very important to not only ask “where’s the beef?” and get to the core requirements of your sourcing and procurement project, but also where is it coming from because, otherwise, you don’t know if you’re getting Grade A Calgary Steak, Yield 5 Utility Beef from Mongolia, or Eastern European Horse Meat. And only one of these will ever be accepted by your luxury restaurant customers.

So just like reporting should be based on facts, Sourcing should be based on facts. Who is providing the product or service, from where, when, how, what production measures are being used and what quality measures are in place, and why, from an objective viewpoint, is it better. Otherwise, you could get sucked in by the fancy demo, the unrealistically low price point, the bundled services, or something else that is actually without value to your supply chain and customer and end up spending more money in the end on warranty costs, transportation costs, auxiliary support costs, and so on.

Procurement Requires MORE Than a Platform

As a result of the M&A frenzy that continued throughout 2018 and recent investments by P&E firms taking majority stakes in a few suite players, every vendor is now all about the “platform” because apparently the “platform” is the ultimate software solution for every Procurement organization.

While it’s true that some vendors are bringing platforms to market with immense value, a platform, in and of itself, has no value. To put it into simple terms, a platform is what you build on … and the best way to think about it is like a construction platform. Without it, you can’t build anything significant … but it doesn’t do you any good, and that’s why the construction company generally takes it away when they are done. The only difference is that a software platform is, in reality, a mix of a foundation (that you build your office building on) and a platform (that is used to finish the walls, etc. on the higher floors).

The reason a platform is important is that, without it, there is no foundation for integrating new modules, integrating third party best-of-breed solutions, or integrating third party data feeds that bring facts and intelligence needed by the organization to make good Sourcing and Procurement decisions.

There’s a reason we asked why is it all about the platform when it should be all about the power last year in the midst of the M&A frenzy. A platform, on its own, does nothing, saves you nothing, but still costs big licensing fees.

Before you jump on the “platform”, make sure it has the “power” that is worth the price-tag. If it’s 100K, there better be 100K of functionality out of the box.

Plus, if it’s a real platform, it should have sufficient do-it-yourself connectivity because, as we have noted many times, no platform excels in everything that is needed to support the S2P cycle and you will have to bolt-on some best of breed solutions and integrate third party data feeds.

Always remember, despite the table pounding and cost-cutting demands, your job is to generate value. There’s only so much cost that can be cut in any category, and once it’s cut, that’s it. So you need something that can identify more value (in value-add services, differentiated/sustainable components the organization can charge a premium for, better reliability, etc.). That takes more than just a “platform”.

How Do You Identify A Truly Stellar Supplier? Part III

Assuming one exists …

Five years ago we first asked this question and a few answers we gave was a stellar supplier was a supplier that

  • actively self manages
  • measures, tracks, and even reports its own performance against SLAs and KPIs
  • accepts — and even helps to identify — the corrective actions it needs to take
  • actively works to not only meet expectations but exceed them
  • communicates as soon as something happens that could threaten a KPI, SLA, commitment, or expectation.

And if multiple suppliers met these requirements, you wanted one that is willing to

  • collaborate
  • jointly identify opportunities for efficiency improvements and cost reductions

But then last year we noted that we missed something important. Most importantly, none of this mattered unless the supplier was willing to

  • open its books
  • expose its supply chain and jointly identify tier 2 risks

But this is not everything that makes a stellar supplier. While its critical that any strategic supplier open its books and expose the risks that affect you, one more thing is critical.

  • platform adoption

If you’re using modern S2P platforms, they all rely on data to deliver their value. And a lot of the data they require is supplier (-related) data that needs to come from the supplier. And since there is no way you can enter all of the data you need from all the suppliers, you need them to use the portal you provide them. You need them to adopt your platform. If they won’t, they are not the stellar supplier you need.

There is No Bright Side to a US-China Trade War

I’ve read a few pieces over the last couple of weeks that some Asian nations expect that a drawn out reciprocal trade war between the U.S. and China could have a bright side for them as they expect that they can lure more manufacturing or agricultural exports their way.

Sounds good in theory, but here are the problems with that theory.

1. A lot of outsourced production over the last two decades has become highly specialized to the point where very few nations have factories with production lines that can produce the goods.

2. The modern electronics industry relies on rare earth metals, and China is the majority producer for many of these — in fact, only a few nations on the planet produce some of these rare earth metals.

3. The only nation that can rival China in agricultural production in Asia is India.

4. A number of companies that need supply assurance have locked in contracts with Chinese (multi-)nationals that can’t be easily broken without penalties.

5. International trade requires logistics infrastructure — good roads, reliable trucking, modern ports, large cargo carriers, etc. Something that not many countries in Asia outside China and India (and to some extent Japan and South Korea) have a lot of.

In other words, there’s not a lot of outsourced production that can be easily switched to other Asian countries, and, most importantly, if China becomes unattractive to the U.S., which we must remember controls about one quarter of global GDP, then

6. Central and South American sources can be just as attractive, and can be easier to source logistically.

Trade wars are never good, and there is no bright side, especially in this trade war.