Category Archives: Market Intelligence

‘Tis the season … to bring an end to seasonality! (And JIT!)

Consumer shopping may be seasonal, but supply chains no longer support seasonality. The pandemic finally broke over-stretched supply chains, they haven’t fully recovered, and, as per this recent article over on Capgemini, we are still in a situation where 42% of CPR [Consumer Products and Retail] (also known as CPG, Consumer Purchased Goods) organizations expect stockouts or product shortages, 38% expect late deliveries, and 35% foresee labour shortages.

Marketers might like seasonality, as it makes them absolutely necessary, and sales people might like seasonality, because it gives them a reason to push sales (and possibly close a sale in a given time period), but human seasonality is limited to SAD (seasonal affective disorder). Just because consumers want to buy 5 times as many units of a product in December as they do the rest of the year doesn’t mean that humans in September can make 5 times as many units. If a plant normally runs 8 hours a day, the most a plant can theoretically run is 24 hours a day and the most it can do is triple its output. But that assumes it has enough, trained, seasonal, workforce. That’s not likely. Maybe it can split the skilled workforce in half, force half to take the second shift, and have each regular worker supervise one seasonal worker in an effort to double output. But a seasonal worker is not going to be as efficient as a regular worker, and, in the end, maybe output will increase by two thirds. Not much better than if they could just convince their entire workforce to work 12 hour shifts for the month and increase output by about 40% (you’re not getting the theoretical 50% as the workforce will be tired somewhere beyond the 8 to 10 hour mark).

Furthermore, you not only need to have five times the amount of product produced, you also need it transported to you — from half a world away. Seasonal capacity, especially in the late summer/early fall (to get goods to North America in time for the holiday season), has always been limited and with the scuttling of many cargo ships during the pandemic (including some ships that never made a single voyage) due to lack of cargo (because China shut a [port] city down), seasonal capacity is even less than it was. So how do you get the goods during the season, which is what you have been doing/attempting to do since the 80s thanks to the Big X and Mid-Sized consultancies advising you to switch to just in time (and push the inventory cost onto the manufacturer/supplier)? The short answer is, you roll the bones and hope for the best (because JIT now stands for just in trouble). And that’s not a good answer.

If you have “seasonal” demand because either

  • your business model is selling seasonal items or
  • you allowed marketing and sales to take what should be a product always in demand and make it seasonal

Then you have to start managing your own inventory close to the point of sale/last-mile distribution (if you do a lot of on-line business) and start building it up months in advance, based upon normal (non-OT production) and optimal distribution volumes. Yes, inventory is expensive, but what you don’t get is that

  • you’re paying for it anyway (because the supplier is charging you their overhead)
  • you’re losing a lot of sales, and profit, when you stock out
  • a few months of inventory is not that expensive and it’s only expensive if you overstock and then have to discount/fire sale

In other words, do proper data driven forecasting, ensure marketing and sales manage demand by driving people to the products that you have enough of that optimize your profit, right size your “local” warehouses, pick the cheapest locales for a region (your main warehouse doesn’t have to be in the city or even the primary business park, can be in a tier 3 business park a half hour out – that’s not going to add much to delivery cost), and start integrating core product management functions back into your business. Even if you sell seasonal, eliminating seasonality from your management model will decrease overall cost (no more shipping at peak rates in peak seasons or paying overtime overhead), decrease stock outs, and increase profit. Just do it.

An Absolutely Fabulous Article by Cory Doctorow on the (Gen) AI Bubble …

and how it’s going to pop like every other tech bubble since the first dot com bust!

What Kind of Bubble is AI?
  by Cory Doctorow

Cory doesn’t say it, but he makes it pretty clear that when the bubble pops, like every tech bubble that has come before, there may not be much less to salvage when it does (especially since no one is thinking about what happens when it does pop).

So I’ll clarify:

A lot of people are going to lose a lot of money

(and while stupid investors hyping this bandwagon heading for a cliff probably deserve to lose every penny, all of the pensioners in the pension funds they scammed don’t; so if you run a pension fund, please pull out of ridiculously overvalued Gen AI NOW!)

A lot of people are going to lose their jobs

(and it’s going to be more devastating to the tech sector than the Silicon Valley Bank failure this year combined with the recession forecast that resulted in over 250K IT jobs being slashed in the USA alone)

A lot of hardware is going to suddenly go idle

and smaller cloud providers are going to go under when the big name cloud providers all of a sudden drop their prices to the floor just to keep the revenue coming in (resulting in the monopolies of Amazon, Google, and Microsoft controlling most of the servers outside of China and Russia)

The problem is, as Cory clearly lays out, when you take one step back and look at the ridiculous hype from a business/revenue lens, all of the big, exciting use cases for AI are either

a) low dollar [and low-stakes and fault-tolerant] (helping us cheat on our [home]work or generating stock-art for bottom feeders [who won’t pay an artist and don’t mind ripping off the IP from thousands of artists]) or

b) high-dollar but high-stakes and fault-intolerant (self driving cars, radiological cancer detection, worker screening and hiring, etc.)

and when you consider the data center costs of these super-sized models (as these data centers consume MORE energy than a small town), low-dollar AI applications won’t pay the bills and high-dollar AI applications cost MORE to deploy than to just do it the traditional way with an educated and capable human!

E.g. self-driving cars don’t work (and “Cruise” needs to employ 1.5 times as many supervisors as a taxi service would employ drivers to keep their cars, which still hit and critically injure people, relatively safe)

E.g. radiological cancer detection requires a human expert to spend the usual amount of time in diagnosis before consulting the AI, and then, if the AI doesn’t agree, spend that much time again

Not that we’re not stopping you from jumping on the (Gen-)AI bandwagon or selling that silicon snake oil that Open AI and Microsoft AI are selling. We’re just not joining you on the (Gen-)AI bandwagon as the steering algorithm is defective and it’s heading straight for a very high cliff at a very high speed …

Merry Christmas!

What Impact Will Power Politics Have on the Sustainable Acquisition of Raw Materials?

the doctor doesn’t know, but it’s a question we need to ask, and answer, before politicians run away with an agenda that maximizes their bank account while simultaneously maximizing economic and environmental damage.

In September, JPMorgan Chase CEO Jamie Dimon stated that geopolitics is the world’s biggest risk and, more specifically, that we have dealt with inflation before, we dealt with deficits before, we have dealt with recessions before, and we haven’t really seen something like this pretty much since World War II. And while he didn’t mention power politics in particular, we’ve seen a lot of first world countries elect leaders with protectionist/centrist viewpoints, a directorial demeanor, and anti- free-trade stances.

Due to a loss of jobs, a loss of manufacturing, and a lack of reliability of supply, we’ve seen a lot of pushback on China (which is a major global source of many raw materials, and rare-earths in particular) while India is gaining ground in the BRICS (thanks to the anti-Russian Sentiment among those Pro-Ukraine and the instability of the Brazilian economy along with the China pushback), the United States implementing Buy American policies, the EU taxing anything they are sanctioning or trying to enforce “Buy EU” policies on, and the UK making decisions since (and including) Brexit that no one understands.

Now, we should all be buying local to the extent possible (which might be the local farm, the state farm, or the farm one country south if ours is too cold to grow the produce we need; and, similarly, a factory in the country or a neighbouring one), when it comes to certain raw materials, especially rare earths and metals for which we do not have (more sustainable) alternatives, one doesn’t always have a choice. And the reality is that, for a given country, only one country will have the most sustainable source of rare earth and/or metal supply when you take into account the mining operation, the processing operation, and global shipping. And if protectionist/centrist/trade policies prevent purchasing from that country, and the next two or three most sustainable (and/or most economical if your company is in/selling primarily to a developing country and you can only afford so many sources), the alternatives are not good.

So while it’s hard to quantify what the current era or power politics will have on the sustainable acquisition of raw materials and (precious) metals, it’s a question your organization needs to answer if you rely on such, and take steps to inform your local lobbying organizations to make sure that critical, sustainable, sources of supply are not blocked until alternatives are developed (especially if your organization needs to hit carbon [reduction] targets).

And if you don’t think this is an important topic, then why did Dr. Naoise McDonagh, a Lecturer at Edith Cowan University and a former Board Member of the Australian Institute of International Affairs, recently publish an article in the interpreter (published by the Lowy Institute) on why Australia must play the geoeconomics game, or risk being side-lined.

Dr. McDonagh believes that acts such as the US’ IRA (Inflation Reduction Act) or the EU’s Critical Raw Materials Regulation, designed to drive growth in a particular industry (and, in particular, North American or EU-based EV supply chains) will act as a vast black hole sucking global capital from other destinations operating on purely comparative advantage terms which includes Australia.

Dr. McDonagh argues that these acts, and similar measures being implemented globally, are part of a geopolitical transition that is creating a two-level world economy: a standard economy with normal market access and a de-risked economy with restricted access for actors of concern. And since the types of restricted access we are seeing typically revolve around rare earths and metals, this means that we need to ask the question we asked in the title: What Impact Will Power Politics Have on the Sustainable Acquisition of Raw Materials?

the doctor doesn’t think the answer is obvious, and definitely doesn’t agree that Dr. McDonagh’s insistence that the answer for Austrailia is the 10-year Australian Renewable Industry Package because the doctor believes the question is more nuanced than anyone currently understands. However, the doctor does agree with Dr. McDonagh’s reading of the situation and that power politics is quickly becoming one of the most significant risks to your supply chain, which is even more unpredictable than strikes and natural disasters.

If you have a partial answer, comment on LinkedIn. We need them before bad decisions are made for us.

The One Sign You Don’t Have a Highly Functional Procurement Department

Recently, on Linked In, Anders Lillevik, who (once) tried to buy and drowned in paperwork (which is why he decided he needed to find a Focal Point), decided to post what he thought were the six signs your procurement efforts aren’t delivering the impact they should. In his view, they were:

  1. No spend visibility
  2. Unhappy customers
  3. Backlogs and delays
  4. Poor supplier relationships
  5. Reliance on manual processes
  6. Department is seen as tactical, not strategic

… which were signs that your Procurement department is not delivering, but not the one sign you have to look for to determine whether or not you have a highly functional Procurement department, since these are all symptoms of a single root cause. In fact, if you wanted to go down this route, instead of identifying the core problem, you could also add the following to Anders’ list:

  1. Spend is spiralling out of control while the
  2. Company is having to fire-sale / toss out expired products and outdated inventory on a quarterly basis and
  3. Your brand is in the toilet thanks to excessive carbon, poor working conditions / human slavery, and excessive waste (and wasteful practices) in the supply chain.
  4. Every department head is screaming “The Sky is Falling!”, “The Sky is Falling!”.

… as these are also signs that your procurement efforts aren’t delivering the efforts. But if you want to know whether or not you have a highly functional Procurement department, all you have to really do is answer this one question:

Do you have a strong CPO providing quarterly metrics charting success improvements over time?

Now we know this is a bit of a cheat, as it’s actually two parts, as just thinking you have a strong CPO is not enough, you need the metric-based reporting to verify, but that’s it. If you have a Strong CPO leading a procurement team charting key metrics across all relevant areas, key categories and initiatives get managed, and, eventually, improved. Moreover, you will find that:

  1. you have great spend visibility across all Spend Under Management (SUM) which will increase over time
  2. you have happier customers as your quality, reliability, and predictability improve in key areas and remain consistent in others
  3. backlogs reduce over time along with unexpected supply chain delays
  4. supplier relationships, at least for key products and services, improve
  5. process automation is employed where appropriate
  6. the department starts to assist other departments with strategy, and begins its journey from tactical to strategic
  7. spend increases are at least contained to inflation
  8. inventory management (and inventory loss) improves
  9. improved supplier vetting and risk analysis weeds out any suppliers known to be exceptionally polluting, use sub-tier suppliers that turn a blind eye to working conditions or slave labour, or be completely indifferent to CSR activities
  10. the department heads stop screaming “The Sky is Falling!” and instead scream “Why Is Everything So Bl00dy Expensive!” (even though Procurement consistently meets or beats market prices)

Not perfect, but all signs that your procurement efforts are delivering the impact they should, or at least getting there.

Consumer Dynamics are shifting like never before. But how does that affect Procurement?

Beyond the obvious, of course. But let’s backtrack.

A recent article over on Fortune noted that consumer dynamics are shifting like never before while purporting to give us some insights from Executives from Instacart, Atlassian, Nordstrom, and Black & Decker [who] share their strategies. However, the insights it shared related to the challenging technology environment the companies, and teams, face daily and not the consumer market in general, which is a very important topic not covered much by most of the publications and analysts that focus on how great the technology (especially AI-backed technology that may or may not work at all) is, but not how it helps you address the consumers that your organization is in business to serve.

Now, it’s easy to track change in demand if you have a good POS system, a good inventory system, at least weekly (if not daily) synchs, and a good DiY (Do-it-Yourself) Analytics system with baseline trend analysis capabilities that can signal changes in demand, the need for rapid reorders to prevent stock-outs, and increasing changes in demand as a result.

It’s not always as easy to track why. Sometimes there’s a strong correlation between the sales and a particular campaign, between the sales and a sustainability initiative, between the sales and recent price decreases in the product line or price increases in a competitor’s product line, or between the uptick in sales and competitor stock-outs, and in this case it can seem obvious, even if it’s not. For example, the campaign may have had nothing to do with it, it could have been the result of a single influencer promoting the product. The sustainability initiative may have had nothing to do with it, as customers may have known it would only impact the next generation of the product. The price decreases may have had little to do with it because it may have already been one of the lowest priced products available at the time as well as the one with the best brand reputation. The competitor stock outs may not have had anything to do with it because those might have been the higher priced products that were only stocked in low quantities anyway.

Moreover, even if you can determine the why with some statistical confidence, that still does not identify the underlying root cause as to why customers reacted to the campaign, the sustainability initiative, the price decreases, or the stock-outs. Are customers shifting towards your brand, adopting a preference for certain products, responding to certain messaging, or just veering away from certain competitors (or at least certain competitor products).

More importantly, how can you predict these trends early, when they are just starting, so that you can make the appropriate Procurement decisions in time to meet the shift in demand better than your competition. Certainly predictive trend analysis (using traditional machine learning fine-tuned to your problem domain) will help, but only if you can identify the right data sets and indicators, which will also mean being able to detect shifts in early sentiment early. So sentiment analysis (not overblown generalized error-prone Gen-AI) will also help.

But that’s just the beginning. Technology indicates possibilities, maybe even probabilities, but not guarantees. For that, you will need a human based assessment of the situation. And possibly an anthropological one. If you want to get ahead, you will need to think ahead of the crowd.