Category Archives: Supply Chain

The Future of Business is … Customer Centric Supply Chains!

Phil Fersht of HFS Research recently did a great LinkedIn post summarizing a fascinating conversation with Malcolm Frank that summarized a few key takeaways, including the following:

For 25 years, IT services optimized SG&A instead of transforming cost of goods sold. AI changes that. The real value now sits in agentic, vertical, customer-facing transformation, not back-office efficiency.

Customer-facing transformation is definitely where the value is in a global economy that is (borderline) recessionary, with joblessness and insecurity increasing by the day, and most people having less (and less) to spend on non-essentials and essentials alike. If you want their business, especially if your product or service is discretionary, it needs to be what they want. With constantly crushing weights on their shoulders, they need products that make them feel good, that make them feel like they are being listened to and catered too, that were created for consumer use (and not for the use by the atypical person in the lab who created something just for them), etc. The companies that deliver those will be the big winners, not the ones that still follow the old Ford Mantra (where you can have any colour you want as long as it’s black).

However, it’s not just creating the product that the customers want because IF you can’t deliver the goods at a price point the majority of your customers can afford and will pay in tight/recessionary economies, then you won’t sell any product at all!

We all need to remember that COGS was always a proxy, as it was easy for the accountants to measure, the same way we use revenue as a proxy for determining if a company is an appropriate target for our software and services. In Procurement, it’s not revenue — it’s how much spend is external, how much we can actually manage (retailers can have large leases that make up a significant portion of external spend which Procurement can’t do a thing about), and how many categories are big enough to give us leverage or real options when sourcing that can lead to savings, quality improvements, more resilience, etc.

This means that the future of business is about two things:

  1. tailoring to customers (because we’re long beyond you can have any colour you want as long as its black) to maximize the amount they will pay (to the point they can pay), which Phil astutely noted in his post and
  2. (dynamically) re-configuring the supply chains (as needed) to offer the products at profitable price points based on what the majority of the market will pay

So this would mean it’s simultaneously optimizing the product mix for customer adoption while ensuring the supply chains are ready to serve and re-optimizing them as needed.

As was noted, at the end of the day, back-office costs are pretty insignificant compared to supply chain costs and increased profits from increased price points that create a product that maximizes what a customer will pay (because the product is precisely what the customer wants, and not a product that is simply close enough that it might work for them).

How to Do “Predictions” Right!

I just finished my dangerous procurement predictions series, where I pointed out 15 of the most dangerous predictions made by the influencers trying to get clicks with sensationalism, whether or not their predictions had any grounding in the real world, and whether or not acceptance of those predictions would lead to disastrous decisions on your part.

And while the majority of annual prediction posts now fall into these first categories, there are still a few, by the old timers, that are done right where they look at where things are, what is happening, and where they are likely to go based on trends and pattern similarity to what came before. (You know, that thing called history that everyone seems to have forgotten about in the AI age that is destined to make the dot com bust look like a tiny blip.)

One example is Bob Ferrari’s Supply Chain Matters post.

Prediction

“The true effects of increased tariffs, U.S. trade policy shifts and the nationalization of supply networks will become more impactful in 2026.”

Prediction Background

“We had predicted that businesses would be compelled toward executing various forms of China Plus sourcing strategies as a response to increasing trade conflict, significant disruptions and needs for added increased supply network resiliency.”

“In December 2025, business broadcasting network CNBC cited data published by Wells Fargo Supply Chain Finance that indicates that since the initial Trump Administration trade conflict, supply chain sourcing diversification has gradually increased away from China and toward the South Asia Pacific region.”

i.e. he looked at the real world situation, and then identified the most logical response … and then followed the market with respect to that response, captured the data, and re-analyzed his position

Tactical Implications

“In 2026, the implications of increased tariff will be manifested in higher working capital costs and increased product pricing among various US and global based manufacturers and suppliers.”

Long Term Strategic Implications

“Our prediction is that within a two to three year window, the effects of U.S. trade policy will lead to a pronounced transition toward more regional focused product demand and supply networks.”

Furthermore, “what eventually comes of the USMCA trade agreement will have fundamental strategic implications for shifts in North America product demand and supply network frameworks.”

Implications for Strategic Sourcing and Procurement Organizations

“Supply chain management teams can no longer focus solely on functionally stovepipe driven key performance and decision-making capabilities nor on singularly focused technology enablement. The organizational implication is one of an end-to-end leadership, goal alignment, and technology enablement perspective.”

i.e. he worked out the short term tactical and long term strategic implications of the developing situation and indicated what leading organizations need to do to survive the turmoil

That’s what a prediction should be — what the reality is likely to be and what an organization needs to do based on that.

Not some whimsical fantasy designed to spread FUD and generate clicks.

Great work Bob!

This post first appeared on LinkedIn.

Logistics is in BIGGER Trouble.

There’s been a truck driver shortage for almost two decades. I remember writing on the estimated shortage of 240K drivers back in 2013.

Moreover, with so many drivers being immigrants or cross-border drivers from Mexico, and the immigration crackdown in the US, it’s only become much worse, as chronicled yet again in the latest #HFSResearch piece.

However, I don’t think their answer of autonomous fleets in the answer. The tech isn’t there yet (as even Tesla can’t deliver fully reliable and safe autonomous vehicles yet, and it’s been working on them the longest in North America), half the states don’t even support testing of such vehicles yet, and, as always with new tech, we’re one bad accident away (as a result of rushed trials) from a major backlash that will stall progress for a decade.

I think it’s time we look back and take lessons from history (which I know most of my American colleagues have forgotten, or you wouldn’t be so enamoured with your current administration that is looking to the 1930s for its administrative policy and looking to the 1880s for its industrial policy), and remember the beginnings of trade. It was horse and carriage (well, mule-and-wagon or donkey-and-wagon) until we got the first cargo ship, which could move mass cargo by sea. Great for port cities, not so great for inland cities. Then the train was invented, and that revolutionized transport (and then travel). Locomotives quickly became more and more powerful, standardized tracks allowed them to run coast to coast, and up to 200 cars of cargo and people could be carried at once, especially if multiple locomotives are used. TWO HUNDRED RAIL CARS.

A flatbed rail car can be up to 89′ in length and 10′ wide.

A standard cargo container, used on ships, is 20′ x ‘8 or 40′ x 8’. A properly engineered flatbed rail car can hold two long or four short containers.

A typical long haul transport truck today is 53′ x 8’6″ (x 13’6″ high). No reason the trailer can’t be replaced with a specially designed 42′ x 8’6″ flatbed that could lock and load a standard 40′ container or that automated systems to lock and unlock couldn’t be designed to easily allow movement between both ships and rail cars AND between both rail cars and trucks. This would considerably shorten the distance that 400 containers (200 flatbeds x 2 containers each) would need to be transported across American roads, and significantly free up the availability of 400 drivers per train (and corresponding lane).

An average long-haul route in the US is 500 miles+! (With many routes up to 800 miles, or more).

An average short-haul route in the US is closer to 150 miles.

Long haul trucking could be reduced by 2/3 if rail was used more and all routes were short haul! Considering long-haul trucking accounts for about 200 Billion miles a year in the US, that’s 120 Billion miles that can be freed up, which greatly reduces the driver need! (If a driver drove 60 miles/hour for 50 weeks a year, that’s 120K miles.) In fact, it reduces the need by almost 100K drivers! It might not solve the entire problem, but it would be a huge dent!

It’s time we start looking back as well as forward if we want to solve the problems of today!

The reality is that over 500 BILLION miles of annual trucking is just too much! Almost 73% of freight by weight should NOT be moving by inefficient truck transport! Trucking.org has some good, and scary, statistics.

This post first appeared in a slightly abbreviated form on LinkedIn.

Dangerous Procurement Predictions Part IV

As per our first three posts, if you read my predictions post, you know SI hates predictions posts. It fully despises them because the vast majority of these posts are pure optimistic fantasy and help no one. Why are the posts like this? Because no one wants to hear the sobering reality off of the bat in the new year and the influencers care more about clicks than actually helping you.

But the predictions are not only bad, they’re dangerous if you believe them. So we are continuing to lay bare the reality of the situation to make sure you understand that this year isn’t much different than last year, no miracles are coming, and only hard work and the application of your human intelligence are going to get you anywhere. Today we tackle the next set, and we hope we’re at the end of the series, but if we stumble across more bad predictions, we’ll have to do a Part V. But we hope not!

11. Negotiation gets productized.

Here’s the thing, in a few niche industries like electronics, we have a few niche players like Levadata that bundle “should-cost” + playbooks + concession sequencing for experienced buyers to help them leverage the state of the market for the best results possible. But they’re hardly used relative to the total electronic market size, as they are used mainly by component buyers / manufacturers, not consumers of such tech (to understand the manufacturer’s margins).

Similar offerings don’t exist across most industries. And even if they did, most buyers are not sophisticated enough to do this. Most struggle with a multi-round RFX, yet alone detailed should-cost/target cost models, negotiation playbooks (which have to cover all standard market conditions and unique situations), and the concept of BATNA, especially relative to offers and counter-offers in a structured concession sequence.

Without these domain relevant niche offerings and career negotiations trained in deep tech, which are both few and far between, this is not going to happen. And Artificial Idiocy certainly isn’t going to fill the gap!

12. AI As a “Governance” Engine.

The claim: When you design them well, agents encode judgment, compliance and brand values into every transaction. Uhm, no! At least not if they are Gen-AI agents that can’t judge (as they can’t even reason), may or may not execute compliant with regulations, and will happily screw a supplier (by refusing to pay an invoice) or customer (by refusing to honour a claim) if it thinks that’s what it needs to do to make you happy or stay turned on (because it was told to find savings of 500K and it’s calculations determine that paying certain invoices or honouring certain claims will not allow that savings goal to be met, if it was even possible when the AI told you it was as it may have arbitrarily multiplied a calculation by -1 just to make the math work).

Governance, by definition, requires the act of governing. And governing, by definition, requires the wisdom as well as the authority to conduct the affairs of the organization. And only truly intelligent beings (i.e. HUMANS) can acquire wisdom over time.

13. There will be no more “X” employees because AI will replace them all!

First of all, how many times do we have to repeat that there are NO AI Employees, you shouldn’t believe the degrading, demeaning, and, frankly, dehumanizing claims, and that you definitely DO NOT want Agentic Buying through fake AI Employees. Secondly, it can’t even do the basic tasks that even the dumbest drunken plagiarist intern can do on a daily basis. But let’s not digress too far before giving you the major examples.

Claim #1: Contract Administrator / Staff Attorney

THE PROPHET has been trying to Kill ALL the Lawyers for quite some time now, and it seems he’s not alone.

But here’s the thing. While AI systems are pretty good (and as good as the drunken plagiarist interns) at spotting grammar errors, redlining against standard clauses, pointing out missing clauses in most organizational contracts, etc., they aren’t good at everything. They can’t identify unaddressed risks without being told what those risks are, they can’t judge the full extent of liability without understanding what those liabilities could be, and they can’t judge the supply geo-political and supply chain risks without broader context.

Plus, they can’t always back up their suggestions; often make up case law, case decisions, and authors; and can’t always judge the requirements of potentially relevant regulations. And we’ve seen many times what happens when even trained lawyers use AI — they get lazy, fall for the slop, get reprimanded and fined by judges tired of the laziness (with a recent example happening in November in Mata v. Avianca, Inc). The previous link also lists three other notable cases where lawyers (and their firms) were fined and sanctioned, but, by now, there are dozens!

But hey, go ahead and replace your lawyer, write bad contracts, make decisions on fake case law, and risk your entire business if you want to. (If you want to, it’s probably safe to go ahead and get rid of the intern who does the redlining and the clerk that does the filing, the AI is probably just as good at that, but do not ever, ever replace a real qualified lawyer with a piece of sh!t “AI”.)

Claim #2: Spend Analyst

Sure you can buy auto-classification that might get to 95%, auto-cubing that can build any cube you can imagine, auto-analytics that can run the entire slate of standard analytics and compute past, current, and projected costs against past current, and projected market data based upon current buying patterns and suggest items, categories, and/or suppliers to (re) source, switch from/to, and possibly (re)shape demand.

But this doesn’t mean that it’s the right items or categories to chase, the right suppliers to use, or even the right area to focus your efforts. It’s based on math, and an assumption of consistent, stable, market conditions, but those don’t exist anymore. If you’re not also considering geo-politics, natural disaster risk, uncertain logistics when the panama canal reaches historic lows for much of the year, terrorists block the Red Sea, and unpredictable weather make sailing around the capes more dangerous than other, and sourcing for resiliency and not just cost, your “spend” analytics are useless. You need an analyst with a good understanding of economics (and access to an economist), geo politics (and access to local experts), and resiliency, not just total cost of ownership buying. (Now, the junior data pushers are probably all dead and gone, but not the real experts!)

Claim #3: Sourcing Event Manager

Now, transactional buyers are gonna get replaced by autonomous systems that use next generation (advanced) robotic process automation enhances with machine learning in Agentic systems, because ordering off of contracts, ordering from catalogs, and doing low-cost non-strategic buys through quick-quote RFPs doesn’t take any brainpower whatsoever (making it perfect for AI that has none).

But strategic sourcing requires more than just buying off of contracts, ordering from catalogs, and issuing quick-quote RFPs! It requires defining key criteria (that go beyond what engineering, marketing, or maintenance provides), identifying validated suppliers (or identifying suppliers that can be easily validated), holistically analyzing the market conditions, determining the best event type, determining the negotiation strategy, etc. The tools might be able to help with initial supplier identification, collecting numerical (commodity) market data, letting you know what event types were run in the past, compiling fact-based playbooks, and, of course, automating each extent of the process, but they can’t do real strategic sourcing that requires real human intelligence. And with today’s geo-political uncertainty, that human intelligence is needed more than ever which means that expert sourcing professionals are needed more than ever. (But dumb buyers will join the dodos.)

There are more ridiculous claims, but you get the point. Skilled jobs are not going away. (But bit pushers are.)

14. New standards for Ethical and Sustainable Supply Chains.

In some countries, current standards aren’t even being met. Good luck getting new standards introduced, since there aren’t a lot of global internationals (with those headquartered in the US in particular) that want even more rigour, especially if it will cost money! As long as laws are being minimally met, or reasonably-sized “facilitation payments” can make problems go away, this is not a priority, especially if going beyond would cost more money!

15. The “AI Singularity” is coming faster than we can process.

It’s not, because the models can’t get bigger, there is no more data, and no one has yet come up with a model that has any hope of even getting close to the actual intelligence of a pond snail.

Plus, if it ever did happen, considering a “singularity” is actually a black hole, it would rapidly consume (i.e. destroy) the Earth, and we wouldn’t have to worry about it. This is just more nonsense from the A.S.S.H.O.L.E.

Primary ProcureTech Concern: Supplier/Supply Chain Resiliency/Continuity

As this is one of the top risks and top barriers to success, it’s no wonder it’s also a top concern.

Why?

Given that supply shortages/constraints have consistently been identified as an organization’s top three risks, and can easily result from geopolitical uncertainty, economic downturns, and even high inflationary pressure, as well as decrease the category/market complexity barrier if key suppliers suddenly exit the market, this should come as no surprise.

Impact Potential

Impact is very straight forward, and summed up nicely by the Arrogant Worms in 4 words: No Sale, No Store. If you don’t have supply, you don’t have product. If you don’t have product, you don’t have anything to sell. No sale, no revenue. No revenue, no organization.

Major Challenges/Risks

  • supplier stability: ensuring they are legit, financially stable, and operating sustainably
  • supply chain stability: country access, operational ports, secure carriers, and so on
  • raw material availability: mine stability, crop protection, etc.
  • financial security: ensuring you have the right agreements in place to ensure supply chain financing as needed
  • multiple relationships: you need primary, secondary, and alternate sources of supply — and for certain materials or products that are rare or unique or bought in low quantity, this can be extremely hard to arrange

Final Words

Supply chain resiliency is in doubt, but supply is crucial, so you need to figure it out. Re-read our barrier and risk pieces and dive in.