Category Archives: rants

Digital Disruptors or Digital Disruptions? Part I

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. Let’s take them one by one.

Connected Home

The promise: more insights into customer demands and usage patterns

The reality: the fridge auto re-orders everything the customer buys, even if the customer only bought it to try and hates it, and all the demand signals are double what they should be … there goes your forecasts!

IoT at Retail

The promise: eliminate shelf stock-outs

The reality: the system not only pushes stock to the shelves, but triggers the inventory system to re-order at push levels, which will include one-time peaks as a result of sales and clear-outs, which will result in excess inventory being ordered (and possibly cleared-out later on to a discount seller)

In-store Robotics

The promise: improve customer service with robots

The reality: the robots drive your customers even more insane than those automated telephone systems, because they can’t be hung up on, won’t leave the customer alone, and don’t stop repeating “I don’t understand your inquiry, please repeat” … end result, lost sales, lost robots (when they are punched to bits), and lawsuits (from the customers who break their hands beating up your robots)

Crowdsourced Delivery

The promise: the gig economy delivers faster and cheaper than you ever thought possible

The reality: sometimes it works, but other times packages sit at a pickup site for a week, get damaged, or just go missing – at rates much higher than with traditional delivery services as the crowd-sourced delivery truck skips a pick-up (because it over-committed), as the Big Box Mart delivery employee tosses it in his truck, and as the thief, who signed up to the network under a false id with the overall intent of stealing high value items for sale, makes off with your goods

And yes, the doctor realizes that:

  • the re-order bug in the connected home could be fixed, or the system programmed to require user approvals for first-time re-orders, but as the system “learns” and gets good, the user will just trust it
  • the IoT Retail system could be alerted of cancelled lines, sale periods, etc. — but without flawless integration, human error will lead to exacerbated error
  • the customer service robots could be programmed to understand get lost and get lost, but there will always be an unaccounted for situation (the customer doesn’t speak an expected language, doesn’t speak at all, has a system indecipherable accent, etc.)
  • the crowdsourced delivery system could be limited to vetted partners, but isn’t that what carriers are?

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.

Whichever Moron Decided that “Touched Spend” Was a Good Metric Should be “Touched” Out of a Job!

Last week over on Spend Matters, the maverick pointed out that there is a new benchmarking metric being collected by CAPS Research called “touched spend“, which is supposedly defined as a new metric to encapsulate sourceable spend and managed spend … and then some. Specifically:

  • Sourceable Spend
    All company-wide external purchases that could be sourced by supply management (whether they currently are or are not). Does not include such items as taxes, fees, legal judgments or charitable contributions.
  • Managed Spend
    Purchases made following policies, procedures or commercial framework developed by the supply management group.
  • Touched Spend
    Total of all spend that has been bid, negotiated, indexed or influenced in any way by the supply management group during the reporting period.

The first two metrics, appropriately defined (using the definitions provided by the maverick, are quite good, but the latter, not so much. the maverick points out that it could use a “little” touch-up, and, in particular, the word “influence” should be removed. As influence could refer to any policy/procedure/system/tactic/whim put in place by Procurement but executed by someone else, who might have a completely different definition or interpretation of the policy/procedure/system/tactic/whim and source using a methodology that would not be approved by any Procurement personnel under any market (or mental) condition.

But that alone wouldn’t make the definition meaningful. There’s still that word “indexed“. Just because you “index” something doesn’t mean you actually take, directly or indirectly, any action to actually manage, or even influence, the spend. The index can be completely ignored by anyone doing the actual buying. Or, worse yet, interpreted as “the minimum” one should pay (instead of the maximum) and lead to all sorts of problems.

And even though what remains after removing the words “influence” and “indexed” is a decent definition of a spend metric, it shouldn’t be called “touched” spend because that just conveys a definition so loose that anything qualifies.

If we examine the definition of touch, which is to come so close to (an object) as to be or come into contact with it, then my way, your way, anything goes tonight. You sent a policy to an end user, they half read it. The spend was touched! You passed an engineering manager in the hall, gave him a tip on a metals category, that he may or may not have taken into account, the spend was touched! You compiled an index that no one looked at … hey, they spend was touched! Because, in each case, you came so close that you could have come into contact with it … even though you did squat. See how stupid this metric is. How blazingly stupid. If you report this metric to any CFO with half a brain (and the vast majority have a full brain, by the way), your credibility is shot … forever.

It’s just too damn easy to touch too much.

And that’s why whichever moron that decided touched spend was a good metric should be touched, where, to be specific, we use the other definition of touch that is to handle in order to manipulate, alter, or otherwise affect, especially in an adverse way where we define “adverse way” to mean shown the door.

The University is Still Here Because …

A couple of years ago TechCrunch wrote an article that asked Why is the University Still Here? In a time where information is universally accessible, knowledge can be compiled by experts and shared in a reviewed and verified form far and wide, and intelligence can be conveyed direct from an expert in Oxford (England) to an able learner in Liberal (Kansas) if both are ready, willing, and able thanks to virtual classrooms with audio-visual conferencing and screen sharing.

Then, earlier this decade, we saw the launch of massive open online courses (MOOCs) where anyone can register for a course from a leading professor, get the lectures, complete assignments, send them to TAs (teaching assistants) half a world away, get graded (automatically for multiple choice and by a human for essay or problem solving questions), and work towards what is supposed to be the equivalent of a University degree. But is it?

First of all, universities, even with remote learning aspects, have always been based on classroom learning. Secondly, advanced programs have always been based on one-on-one instruction between teacher and student. Thirdly, they have always been based on carefully structured curriculums that are designed to ensure a student gets an appropriate depth and breadth of knowledge. Fourth, the testing is always done in a manner that makes cheating or plagiarism difficult.

MOOCs are the antitheticals of University. They are trying to abolish classrooms. There is no personal one-on-one instruction between a recorded lecture and a semi-engaged viewer. The student can design their own haphazard curriculum that ensures neither depth nor breadth in the appropriate subject matter. And anyone can submit a document created by anyone else and there is no way to know.

But the failure of MOOCs to displace universities is not an argument for the continued existence of universities. Just because X does not displace Y, that doesn’t mean that Y is superior. It just means that the masses do not believe that X is superior. In our case, it’s not enough of a case for universities.

To make the case, we look at where MOOCs failed. As per the techcrunch article, they failed in keeping a user’s interest. Most people who registered for and even started a course, never completed. Most who completed didn’t come back. They weren’t motivated. The reasoning in the article is that because, for the majority of learners, it was part time, on their own time, it never got primacy and without primacy, efforts get abandoned.

And that’s part of the reason MOOCs failed and part of the reason we still need Universities. When you go to University, you make education a primary focus of your life. But the other reason is that a real, established, prestigious University provides something no other form of education can — a well-rounded full-featured educational experience with primacy, one-on-one instruction from an expert, great curriculums, and, most important, a community to share the experience with. This last aspect is key — you are part of a dedicated group of people there to learn and share the experience of learning and better each other in the process. And while that group shrinks a bit over the years, by the end, you have your own support group, and possibly a few colleagues for life, that got you there and take you further. That’s something you’ll never get from a MOOC.

And that’s why Universities still exist and need to continue to exist.

The Advanced Supply Management Phoenix Takes Flight

As indicated in our last post, Procurement needs to evolve, fast, or join the elephants in the elephants’ graveyard. But, as we also indicated, just making the natural progressing to an advanced strategic sourcing function that is based on an advanced (optimization-backed) sourcing solution is just the beginning. While this will likely extend your longevity by (at least) a decade, it’s not enough to grant you a permanent stay of execution.

The next step, as hinted at, is advanced spend analytics that can find value opportunities across categories through category re-organization, raw material identification and sourcing on behalf of a supplier, multi-level service and MRO category identification (for advanced sourcing), hidden trend identification, demand shift opportunity for category and SKU rationalization, and other value capture opportunities that out-of-the-box reports and even GPOs and consultants miss.

But don’t stop there … eventually those opportunities will be found and more and more opportunity detection algorithms will be encoded in standard analytics suites to the point where the majority of these opportunities will be detected by advanced, machine learning, cognitive analytics suites.

Move on to Supply Base Design. Don’t just source each category on its own, source each category in the context of an optimized supply base that will allow for SKU rationalization, logistics cost reduction, supplier development across a greater portion of the rationalized supply base, access to government benefits from a concentration of business activity in a region, and so on.

And do this in conjunction with design for reduce, reuse, recycle, and recovery (4Rs) so that there is no waste, especially where the corporation is responsible for taking the product, or something it contains, back under appropriate governmental regulations. And even if there are no governmental regulations, if there are valuable components that can be reused, recycled, or sold for other uses, helping the organization reclaim dollars that used to seep out the door is valuable. Plus, it shows that you can help with product design and redesign and bring value that consumer-oriented design will miss.

But don’t stop there … help your suppliers with their own supply base design and design for 4Rs to push value creation further down into the supply chain. At some point, the only value will come from enabling your suppliers to cut costs and innovate in value-generating ways that they previously could not.

And then you will survive regardless of what future exists.

If the mega-corporate world materializes, your ability to push down into the value chain will give you an edge that makes it worth keeping you around. Even if there are only three big guys for each product, going down a level there are nine big guys contributing to your product, and down another level there are twenty-seven … not only does each level of the supply chain have to be appropriately filled, but any improvement at any point of the chain will bring value.

If the project economy materializes, your ability to identify an appropriate supply base that can work with you to design for the 4Rs and minimize SKUs while maximizing stakeholder value will make you the most valuable project management candidate out there.

And if we return to the barter economy, your ability to work with suppliers to design what is needed, in the most efficient way possible, and help them identify how your products will be more valuable than your competition’s. This will be much more attractive to a potential supplier than some sales guy pushing a lower priced product that the supplier doesn’t really want.

In other word’s, if Procurement can transform to a true advanced Sourcing organization, it can survive. Otherwise, I’m sure the elephants are making room as you read this.

The Advanced Supply Management Phoenix …

… that rises from the ashes and replaces the modern Procurement organization that has one foot in the grave and one in the fire. But this is not just the advanced sourcing that SI has been preaching this year, not just enhanced category management, not even just enhanced supplier relationship management or supply base management. This is really the creation and implementation of design by sourcing. Not design for sourcing, which some extremely advanced organizations are attempting (which is akin to design for recycle, which is part of design for sourcing), but truly a significant evolution of the entire function — as the only other option is, as far as the doctor can tell, to accept that it’s in its final days and will soon die out of existence regardless of what future, described in our previous two posts, comes to pass.

The reality is that the word is changing and no one needs someone who’s only job is to find a source for a product or service. Thanks to the internet, anyone can do that … and have it delivered as early as the next day if needed as these sources generally integrate with multiple global logistics carriers which have extremely quick, air-ship, options for anything from small packages to entire cargo holds. Even if the worst case happens and we get with a mega solar storm produces a solar flare 5X as powerful as the Carrington Event and takes down every power grid on earth, and the internet with it, for weeks to months, it will still be possible to find sources of supply as, guess what, you’ll be going local … back to all the factories you used to know. And you’ll be paying local currency or, more likely bartering, and it will be sales guy vs. sales guy negotiating, because that’s what they do.

So Procurement needs to evolve, fast, or join the elephants in the elephants’ graveyard. Because, let’s face, it, without evolution, that’s the only place Procurement will soon be welcome. (It won’t even be welcome in the local cemetery. With real estate becoming scarce for every use, cemeteries will soon be reserved for the honoured dead. Procurement will not even be among the honoured dead.)

But it has to go beyond the natural evolution to an Advanced Strategic Sourcing function. While this will get it over the hump and extend it’s longevity by (at least) a decade, as it will be finding value that its peers will not (for all of the reasons covered in the many posts on advanced sourcing this year, and more, on why you need to adopt an advanced sourcing solution) and have the support of the CFO as long as the value increases (and superficial savings keep hitting the bottom line), it won’t be enough. At some point, there will be template models for all the categories, including the simple tail spend categories (that will have simple models for optimization-backed options) and anyone will be able to start with those models to source their own products and services, or just turn it over to a cognitive procurement solution that will do the sourcing on its own.

So where does it need to go? Stay tuned for our next post in the series.