It only took ten (10) days^*, but we’re finally in the midst of counting down the seven (7) “future” trends that are actually new enough, with the right interpretation, to fall into the “future trend” category. Today we continue with a discussion of the final two trends that fall into the like new remanufactured shoes category.

5. Return to Regional and Local Sourcing

This is another “future trend” that’s not really new, as outsourcing and insourcing continually rises and ebbs in a cyclic sine and cosine wave, but this time around, in leading companies, it’s taking on a new form and providing Supply Management with better opportunities than it has had in a long time. The justification for going out is usually lower labour costs, and the justification for coming back is usually lower transportation costs. And the switch usually occurs when one cost or the other cost rises or falls sufficiently to change the total cost of ownership equation. But now, thanks to continual advances in automation, there are more reasons to come back than to stay away.

With significantly less manpower required to produce significantly more automation, and the ability to take communication and complexity cost out of the equation by centralizing R&D and development, not only is regional becoming lower cost than overseas, but with the right creativity, you can often keep costs low and value generation high while sourcing in your own country, often from your own backyard. (For example, if you look at the difference between median household income across the United States, the top state in 2011, Maryland, was almost twice that of the bottom state, Mississippi, and the differentials between big cities and small towns can be even more disparate.) Sourcing at home does not have to be expensive if you pick the right locale, install the right automation, and knock the creativity up a notch. If Foxconn China is outsourcing to Brazil to serve North American customers, that should tell you something. (If it doesn’t, you better go see a medical doctor to have your hearing checked. If you pass that test, then you better go see a neurologist.)

4. Control Tower Model / Omni-Channel Approach

One could argue that the omni-channel approach is an ongoing blues as leading retailers started integrating mail-order, storefront, and web-based channels into a single distribution channel about a decade ago, but the phenomena wherein many of these same retailers are planning their advertising and sales as a unified omni-channel strategy on the front-end vs. simply unifying distribution efforts on the back-end is much more recent. So this is really re-manufactured shoes. But more importantly, the leading organizations have realized that it’s not de-centralized vs. centralized vs. center-led, it’s picking the right strategy for each category and each business unit and effectively managing that through a control tower that monitors, predicts, adapts, and responds to the market as necessary to make sure the supply chain from source (raw material provider) to sink (final end user) flows smoothly and optimally at all times.

In other words, as we pointed out in “future” trend 24 when we were covering old news, you only have three choices for governance — centralized, decentralized, vs. center-led, but there is nothing to stop your organization from deploying multiple models across multiple categories, and the right application of the right model can give your organization a boost in its supply management capabilities. This is the logical next step in a Supply Management organization that integrates governance, risk monitoring, collaboration, systems, business process convergence, supplier management, and supply management strategy under one umbrella. It’s the process of taking everything you’re doing right to the next level. It’s really renovation, not innovation, but a necessary renovation as most organizations have not yet even thought about the potential of a control tower. As a result, fewer still have taken any steps to making this a reality.

Ten days later and we’ve made it to the final three at last! The final countdown! The three “future trends” that are real, not imaginary. The three trends actually worth talking about. The three trends that we are going to dive into … tomorrow!

It only took nine (9) days^*, but we’ve finally reached the point where we are down to the seven (7) “future” trends that are actually new enough, with the right interpretation, to fall into the “future trend” category.

7. Supplier Pre-Payment

We’ll admit that this belongs in the ancient category with governmental regulation, margin pressure, and supply chain risk, because pre-payment has been around as long as demand has exceeded supply. So why is this in the like-new re-manufactured shoes category? Because you can pre-pay your supplier. You can pre-pay your supplier’s supplier. Or you can pre-pay the supplier of your supplier’s supplier. The first is old news. The second is ongoing news. But the third, well, that may just be remanufactured shoes. There was a reason that, once upon a time, companies were vertically integrated. That’s because when you could control the costs all the way down to the raw material extraction, you could minimize the cost.

So what do you do when you can’t control all the costs? You control the margin, and you buy when the market is good, or when you have the chance to lock in supply before prices rise even more. And if you buy on behalf of your supplier’s supplier, you can buy raw materials in bulk, often at a lower cost than your supplier’s supplier, and provide these raw materials at no margin to your supplier’s supplier, who is making the components or sub-assemblies, and keep costs down throughout the entire supply chain. Not just your little piece.

And with the right supply chain visibility, you can do more than just identify risks — you can track costs through the supply chain and do true multi-level should-cost modelling, optimize spend throughout the supply chain, and when it’s cheaper to buy on behalf of a supplier, or a supplier’s supplier, or to pre-pay a supplier so they don’t have to go to a loan shark to make payroll, do that. This allows you to take out cost where competitors without the same visibility and forethought can’t. It’s an old, old, old idea, but a new application of this idea can take your supply chain to the next level.

6. Data-based Predictive Analysis

While data-based predictive analysis is not new, as businesses have been doing sophisticated statistical trend analysis for decades (and SAS has been around for over 35 years), the application thereof in Supply Management is relatively new as there hasn’t been much in the way of good data for Supply Management before the implementation of a good sourcing or procurement suite. Furthermore, the applicability of data-based predictive analysis only gets interesting when there is significantly more data to analyze than what is within a company’s four walls, and the ability to access significantly more data is a recent phenomenon.

You see, not only does predictive analysis suffer from the same problems that spend analysis suffers from, but the magnitude is amplified where predictive analysis is concerned. Backing up, it’s impossible to do spend analysis on data you don’t have, and it’s impossible to do trend analysis on a product that is not yet released. In many verticals — fashion, electronics, etc. — product life-cycles are so short that you can’t do a reasonable spend analysis until the product is at end of life and by the time you have enough data to do a reliable trend analysis all you can predict is the obvious: sales of zero. Now, if you have multiple, successive, product lines in the same category — like yourPhone 1, yourPhone 2, yourPhone 3, etc. — then you will eventually be able to predict sales of the successor product with reasonable accuracy, assuming no major unexpected changes in the market. However, you’ll be left in the lurch when it comes time to predict spend and performance on a new product line. That’s why you need considerably more data than resides within your fall walls and that’s why data-based predictive analysis wasn’t really a reality until the last few years as it was only in the last few years that Supply Management products emerged that collected, tracked, and integrated market data with your data. This permitted you to not only do realistic should cost models on new product lines, but multivariate predictive analysis to judge how well, under a certain set of assumptions, your product could do in the market and how well your supply chain could perform (from cost and risk perspectives) under those assumptions. So while this is ongoing blues in the business world at large, it’s recycled shoes for Supply Management. The hand-me-down has the potential to acquire new life in Supply Management.

Are you excited that we’re finally discussing more recent trends, Mr. LOLCat?

^* And you wonder why Tard is go grumpy. He knows the truth.

It’s taken us eight (8) days, but we’ve finally reached the point where, even though these “future trends” are already here in leading organizations, there’s still some life left in these trends and forward thinkers still have an opportunity to get a bit of a leg up on their competition if they go just a little bit further. However, true forward thinkers have been preaching about these trends for over a decade, so they’re not exactly new shoes, even if, to you, they look like they’re still in the wrapper.

11. Transparent Pricing (thanks to “the cloud” and “big data”^*)

This is another trend that’s old news. With the introduction of the internet, e-RFX, and e-Auction technology, which is almost two decades old, and the proper application of database technology and should-cost modelling, pricing has been increasing in its transparency for almost two decades. And with some tools tracking this data across all public and private channels at your disposal, we’ve reached a new level of transparency. Soon the nature of the conversation will change from “what’s the lowest price you can give me” to “how can we work together to take cost out”. When that happens in more than a handful of companies, and it needs to happen, we will truly have reached the next (but nowhere near the last) level of Supply Management. So while this is still ongoing blues, as the leaders have been here for a few years, it’s at least a trend that the doctor can get behind. When it comes to this trend, he can almost stand for it standing.

10. Using e-Procurement to Integrate Sustainability

Sustainability starts deep in the supply chain, not in the retail store. Sustainability is about designing products that use recyclable or replenishable raw materials, minimizing energy requirements (and making sure renewable energy sources are maximized in the production process), and minimizing the utilization of other natural resources and, in particular, water (as fresh water is in short supply). The best place to integrate sustainability into your supply chain is in Procurement. In business, money talks and if you want to make sustainability happen, you talk with your money. And if you want to have a lot of money to talk with in the future, you get sustainable now because, even if there is an up-front premium, raw material and resource costs keep going up and, someday, your costs will be less than your competitors who didn’t get the memo and reduce their non-renewable resource consumption when they should have.

09. New KPIs

It’s true what they say, what gets measured gets managed, and this means what gets measured well, gets managed well. And this means that continual improvement in your KPIs results in continual improvement in your Supply Management. Just as it has for the last twenty years. But this old news still has some life in it. There’s still, hopefully, innovation left to come in Supply Management, and each of these innovations should be accompanied by appropriate KPI improvements. No guarantees, but here’s another trend that we can look upon positively for the time being.

08. Lifecycle TCO

Ever since the first e-Auction failed to deliver a return, which happened to every company that went e-Auction crazy — because once you squeeze the fat out of a supplier’s margins, there’s no savings left to be had on unit price alone — the conversation quickly elevated from unit cost through landed cost to early definitions of total cost of ownership because, when demand exceeded supply, it’s the only way a company could identify real savings.

But, even today, most “TCO” calculations only look at minimizing landed cost across related commodities in a category with immediate utilization costs — such as waste product disposal (from the manufacturing process), expected warranty costs (from consumer returns), expected return costs (to your supplier), etc. They typically don’t extend to end-of-life recovery and disposal costs (as required for many electronic products under various global legislations), production cost models (to help you weigh lower life-time cost vs. the lower right-now cost), premiums for sustainability (as some consumers will pay a few percentage points more for an ethically and sustainably made product), or the marketing benefit of using a certain supplier (e.g., Intel inside). And as the reach of Supply Management grows, so does the opportunity for total lifecycle cost modelling and minimization. There’s still opportunities here for the creative. Leading companies, such as those in The Hackett Group top 8%, have explored most of these, but the remaining 92% of you haven’t. That’s why this is ongoing blues, but unlike The Cloud that beats you black and blue, at least when you think about TCO more holistically, you start to think to yourself, What a Wonderful World.

It’s been eight (8) long days, but we’ve almost made it! Two (2) more days and we’ll be ready for the true “future” trends. All three (3) of them. Just two more days!

^* Don’t get the doctor started on “big data” either. Just don’t.

It’s been a tough slog, but we’re finally in the midst of the trends that are recent enough to be classified as “we should be mastering this” as opposed to “we should have mastered this (a) decade(s) ago”. This should be good news, but considering that it’s still going to be eight (8) more trends and two (2) more days before we get to a “future” trend that’s actually recent enough to classify as “like new remanufactured shoes”, when we look at the big picture, it’s not. We need more innovation, not renovation, or, even worse, reincarnation of trends that should have been entombed with the mummies.

But let’s get back at it. We’re not quitters here. We’re going to finish what we started. Even if the state of affairs has left us broken hearted, we’re going to tough it up and not ask for sympathy.

15. System Integration With Partners

This is a logical consequence of e-Procurement System Adoption, Better Governance Models, Business Process Convergence into Supply Management, Increased Strategic Focus, and Stronger Supplier Relationships. As more companies adopt e-Procurement systems, a trend that has been going on for over a decade, there is more need for integration. As more companies adopt better governance models, they acquire the need for more visibility, which can be obtained through system integration. As more companies converge their business processes, the supporting software platforms need to be integrated and merged to support this. As focus gets more strategic, it gets more inclusive of partners. And as the need for stronger supplier relationships takes root, henceforth comes the need for strong system integration with those suppliers for greater supply chain visibility.

14. Shorter and More Complex Product Life-Cycles

I’m not sure what industry to blame for this one — the console industry, which releases a new platform every few years, the electronics industry, which feels the need to double the output power of whatever it’s selling every two years, the cell phone industry, which has insisted on releasing newer and better phones every year, or the portable (laptop/tablet) industry which does the same. Regardless of who’s to blame, despite the fact that product complexity is going through the proverbial roof, product cycles have been steadily shrinking for the last two decades with no end in sight. It’s getting to be old news, but because the sophistication of the processes and technology required to handle these ever shortening life cycles needs to continue to increase as well, the doctor has promoted this trend to the category of ongoing blues. It might be more than it deserves, but qui ita iustus est.

13. The Cloud

The Cloud. The mega-trend, future-trend, you-must-have-it trend. The proverbial answer to all our problems. The two words that can unleash a verbal assault from the the doctor so intense that a psychiatrist might be compelled to consider diagnosing the doctor with with the worst case of Tourette Syndrome ever recorded. Despite numerous claims, the cloud is not a fluffy magic box (and we’ve told you this again and again). It’s a storm cloud that is filled with hail. And if you got cloud, I got your mail. No crystal ball (which the cloud is not) required. While the doctor doesn’t know how many more years we’re going to have to put up with the constant stream of nonsense marketers are pushing upon us where the cloud is concerned, he does know that every year is another year too many. And trying to fight it makes one feel all black and blue. It’s a flood of folly. How do you stop it? Calling it ongoing blues is an understatement. It’s a flood of despair that never, ever ends! The only positive is that when the flood of despair washes over you, you no longer care that Kim Kardashian wore the same outfit three times in a week.

12. BYOD / Mobile Procurement

Twenty-two “future” trends later and we’re finally at a trend that is almost forgivable. Almost. But only if it’s on a trend list produced by the most junior of analysts charged with a task that is way above his pay grade and competence level. And even then, its just almost forgivable. Because, regardless of it’s status, it’s been easy to predict for years that this is one trend that is going to increase in prevalence now that tablets are cheap, people expect choice, and BYOD just makes sense for many business that aren’t big enough to negotiate better plan deals than what is available to an individual. Why spend time and effort managing cell phones and plans when it’s quicker and cheaper to just reimburse an individual 65% of her mobile bill on her monthly expense report? And not have to pay for the phone. And why force an employee to carry around a cumbersome laptop that is likely to get lost or stolen if she can do the site visit on a light, cheap tablet (that you might not even have to pay for)? It just makes sense for a lot of companies, but because they have yet to wake up and smell the roses, this one actually needs to be on a few trend lists for a few more years (even though it should be old-news). Just don’t tell the doctor it’s the grand future when it’s really the right now!

We know that we have already pushed out four full posts since we started discussing old news, and that we should be done, but we’re still not done! Not even close! So if you were wondering why the doctor is still ranting and raving like a mad man, it’s because he is still very mad. So far we’ve exposed 12 “future trends” that are so outdated that Astroturf is revolutionary. And we’re not done! Not even close! We have three (3) more to cover today. It’s beyond insane! There’s no word for it! I’m betting, if he were still alive, even Einstein would have difficulty comprehending how so many hog manure “future trends” still see the light of day. And that’s why, once and for all, we have to bust them up — one by one — until they all fall down.

21. Increased Raw Material Scarcity

We’ve been dealing with raw material scarcity issues for centuries. Some as a result of unfettered demand. Some as a result of limited production. Some as a result of gross incompetence. For example, take the oil crises of 1973 and the rapid rise of oil prices in the 1990s. Or the gold price spikes between 1933 and 1948, 1973 and 1977, 1979 and 1981, and the almost unparalleled rise between 2001 and 2011 (somewhat balanced by the myriad of gold rushes between 1800 and 2000 around the world that, eventually, caused the price to drop significantly because of the influx of gold). Or the plethora of famines that have occurred around the world over the last few millennia since the first famine was recorded in the history books in Rome in 441 BC^*. The only difference is now, thanks to computer, laptop, tablet, and cell phone proliferation, the scarcity has shifted to rare earth minerals. And when you consider that the Earth’s population is rapidly increasing, as it is now four (4) times what it was 100 years ago, and that the planet, and the resources it contains, is finite — it doesn’t take an Einstein to put 2 and 2 together and come to the conclusion that, as time goes by, more and more raw materials are going to be in scarce supply.^**

20. Increased Strategic Focus

Isn’t this essentially what Drucker preached for the entire course of his academic and business career? When you get right down to it, strategy is not about numbers, it is about using what the numbers are telling you to do something right. And that something right is something that is done by your people. Drucker was all about building relationships, bringing out the best in your people, and making them an integral, happy, productive part of your community so that together they could do something better than each individual could do on their own. In other words, helping your people help you do something right, and grand, and wonderful. If this isn’t one of the best pieces of strategic advice ever, the doctor doesn’t know what is. So don’t tell me strategic focus is new. Drucker was preaching better management (which is key to organizational success) since he started working with IBM in the 1940s. That’s before most of us were even born!

19. Service Providers Excel (and surpass in-house ability)

No one in their right mind^*** outsources a back-office function to an outsource provider without a reasonably strong belief that the outsource service provider can do the function at least as well as the company can at a cost that’s at most what the company is currently paying to get the job done in house. In the early days when the outsourcing craze hit full tilt back in the 1980s, this wasn’t always the case, and some providers did so bad they actually flopped. But many didn’t, and some of these got very good at what they did. Very good. And in the 1990’s you had a large number of providers who could do back office functions at least as good as their clients, if not better. And then with the introduction of e-Sourcing and e-Procurement systems in the noughts, a few of these outsource service providers really took off and became so good at transactional procurement or sourcing of select categories that they can run circles around their clients. Depending on the function, there have been service providers that have been better than the majority of their clients for at least 10, if not 20 years, in Supply Management and related functions. So, like the fourteen (14) “future trends” that precedes it, this prediction is really old news. And the doctor, for one, is tired of reading about it.

^* There is biological and recorded evidence (in the form of hieroglyphs and hieratic) of famine in Egypt around 2200 BC during the collapse of the old Kingdom, but as the remaining records are few and the biological evidence minimal, it’s hard to precisely date the famine, which was a relatively rare occurrence in Egyptian history. The Egyptians were the agricultural masters of their time and only on rare occasions where the Nile flooding was considerably more or less extensive than usual was food limited and famine a real possibility (if over or under-flooding of the Nile happened multiple years in a row).

^** Maybe we should be more forgiving considering that less than 1 in 7 American adults are “proficient” at math? Hell no! When we lose basic logic and reasoning skills and care only about whether or not Kim Kardashian has the same look twice in one week, the world will go to hell in a handbasket so fast that we won’t even have time to blink — so you will get no lenience or forgiveness from me. [We didn’t make this up! A headline on Daily Mail, yes, Daily Mail, was That’s unlike you! Kim Kardashian wears the same look for the THIRD time in a week ….]

^*** the doctor knows being in one’s right mind is not a pre-requisite for an executive job in some countries, including the United States, but we’re going to assume it should be and move on.