Sustainable Supply Chains Sacrifice China! (Most of the Time.)

Where your supply chain is concerned, China has just demonstrated what SI has known for over a decade — it is the enemy. (This isn’t the only situation where China or the CCP is the enemy, but those are different rants. Note that we do NOT equate China or CCP with Chinese people. Most Chinese are NOT the enemy of your supply chain or democracy just like most Americans are NOT the enemy of intelligence and common sense.)

Long time readers will know that in the naughts, SI spent a lot of bandwidth telling your deaf ears that you should be investing heavily in nearshoring and home country sourcing because of the dangers of outsourcing in general, and, the dangers of oversourcing to a specific country, like China, in particular — which have finally become very apparent. It’s too bad it took a freakin’ pandemic to make clear how dangerous it is to outsource so many critical products and JIT materials to a country halfway around the globe, especially when such sourcing in bulk across the industry leads to the lack of capacity close to home due to factory closures and talent evaporation.

There’s a reason the doctor told you two weeks ago to remember the 80’s (and the early 80s in particular) … and that’s because that’s the last time most multi-national corporations in the Americas got outsourcing right … when they were near-sourcing to Mexico (who should build the wall just to keep Trump out, but that’s yet another rant for another day).

Let’s face it, some stuff just shouldn’t be sourced from home. Stuff that’s not critical, stuff that’s very expensive to make at home (but easily trucked across a single border) for various reasons (which can go beyond labour to energy costs if there are no affordable renewable sources nearby, transportation costs for raw or unprocessed materials are ridiculous otherwise, etc.), or stuff where most of the raw materials or necessary environmental conditions (for growing, mining, etc.) are just not present at, or near, home.

But when you consider a typical organization, how much stuff really falls into this category? First of all, you have to exclude any product for (re)sale that’s a primary profit line. Then you need to exclude any raw material or component critical to production unless you just can’t get it nearby. Then any product necessary for security or safety. And so on. At the end of the day, you don’t have much left, and if you’re doing the analysis right, you’re going to be left with:

  • raw materials and products just not available nearby (because you need certain growing conditions, large deposits of a mineral only found in certain geographies, etc.)
  • processed materials or chemicals where the raw materials are very expensive or dangerous to transport
  • products unique to a culture or region
  • novelty or other items not critical to your business

which (before the short-sighted wall-street loving common sense hating clueless and unskilled consultants of the late 80’s and early 90’s, like Steve Castle, put everything into the outsourcing bandwagon and blinged it out beyond belief) were the only products a company would outsource halfway around the world and still the only products a company should be sourcing from halfway around the world. Everything else should be near-sourced, and if really critical or the cost differential is small, home-sourced.

This also means that just shifting everything to another country in the BRIC, and India (which is ruled by a more open, transparent, and dependable democracy) in particular, is also NOT the answer. (They may not be the enemy, but they are still NOT the answer.)

So, unless you want your Supply Chain to completely collapse after the next global disaster, go back to basics, remember the smart outsourcing decision from the 80s, reopen those Mexican factories, and start near-sourcing again. And then, where you can, bring it back (close to) home.

Coronavirus/COVID-19 Response: Analytics Can Help Get You Through the Crisis

In the first stage of the pandemic, mines close, processors close, or other suppliers of critical raw materials become unavailable and your direct procurement becomes threatened, and you have to identify new sources of supply quickly to maintain supply assurance, while also making the best selection for the business to keep total of cost ownership acceptable and predictable (as a lower cost risky alternative could put you back in the same position in a few months). You need good analytics to make the right decision.

In the second stage of the pandemic, factories close, certain distribution channels become unstable, and distributor stockpiles run out and indirect goods become scarce and problematic across key categories. And you need to respond. Good analytics will again be key as you don’t want to be going back to market in three to six months, but you also need to keep costs down to insure you have the cash to deal with cost spikes in direct lines where supply unavailability significantly tips the supply/demand balance scale or where costly expedited logistics will be needed. You again need good analytics to make the right decision.

And unless you have a modern best-of-breed Source-to-Pay suite with great analytics embedded or a best-of-breed stand-alone analytics solution, you don’t have anywhere close to what you need. Just a few of the questions you will need to answer include:

  • How much am I paying now for a product, and how much should I pay based on today’s commodity pricing and currency volatility?
  • How do I understand the cost impact of supplier failure?
  • How do I understand the cost impact of raw material availability?
  • How do I identify outliers that might signify future issues or opportunities?

… along with dozens more. So how do you answer these questions? What technologies do you choose? Check out the doctor‘s CORONAVIRUS RESPONSE: Advanced Procurement Analytics — find the risks hiding in your data, prioritize and take action Pro piece over on Spend Matters. Even if you don’t have Pro access, the content in front of the paywall is still useful and might give you some ideas on where to start.

Surviving the coronavirus crisis for the self-employed or COVID-19 disenfranchised (Part 3)

In our previous two installments in this coronavirus series for small-business owners, we noted how two general categories of business have been hit hard by the coronavirus shutdown: services and non-essential products. We focused on how those businesses not selling products will be especially hard-hit and have to be creative with e-commerce, social media and other online tools to have any chance of survival in some cases. We also noted that these businesses would not be able to maintain staff levels and would be contributing even more to the COVID-19 disenfranchised workers as time went on.

The shelter-in-place emergency measures mean less shopping or spending money on a meal or a night on the town — so a large number of people are out of work, including:

  • entertainers
  • sales clerks
  • wait staff (restaurants, coffee shops, liquor establishments, etc.)
  • personal services professionals (tattoo artists, barbers, stylists, cosmetologists, etc.)
  • tour guides, museum staff, etc.With the exception of some personal services professionals who can work out of their homes, there is no traditional work for these individuals. This doesn’t necessarily mean that they can’t do anything related to their chosen profession, just that they can’t do it the way they intended to do it — and that they might need to find other work to supplement their income. Or they may need to change jobs for the time being (and in doing so they just might find a better career).

So what can they do? Read Part III of the doctor‘s 3-part series on Surviving the Coronavirus that just posted over on Spend Matters.

Vendors They Are Complainin’

come gather ’round vendors
wherever you roam
and admit that the methods
around you have grown
and accept it as truth
tech reviews set the tone
if your time to you
is worth savin’
then you better accept it
or you’ll sink like a stone
for the time’s they are a-changin’

come purchasers, sourcerors
rally the call
don’t stand in the doorway
don’t block up the hall
subjectivity
it will cause you to stall
there’s a battle outside
and it’s ragin’
it’ll shake up you platforms
and rattle your apps
for the times they are a-changin’

come buyers and sellers
throughout the land
don’t let vendors fault
what you can understand
as market assessments
are beyond our command
the old ways are
rapidly agin’
push those out of the new one
if they can’t lend their hand
for the times they are a-changin’

In case you haven’t figured it out, SolutionMaps launched last month to the delight of practitioners who can get a 100% unbiased tech. vs customer view, and the disdain of a handful of vendors who (complain for weeks because they) think we should take more subjective factors such as long-term roadmap, innovation, market size, customer size and complexity, product strategy, market strategy, etc. etc. etc. into account (so our maps will look more like the other tragic quadrant and grave reports).

While we all readily and wholeheartedly agree that these are all extremely important factors in your vendor selection, none of these are relevant in platform due diligence, which is the first thing you need to do before considering a vendor for your shortlist. (If the platform can’t do what you need it to do, it doesn’t matter how great the vendor’s organization is.) Since this is the hardest thing for a relatively non-technical Procurement (or Finance) person to do, this is what, and only what, we focus on — verifying that the foundations of the platform are solid and that key requirements for the module / suite functionality we evaluate are there. If a vendor platform gets a good analyst score, you can be sure it’s solid. If a vendor gets a good customer score, you can be sure the vendor has a history of delivering on what they promise and/or providing great service. If a vendor gets good analyst and customer scores, then, for their target market, they are a great fit.

However, as we make clear in this white paper on How to Use SolutionMaps, just because a vendor is great for their current customers in their target market, that doesn’t mean they’re great for you. If their target market is mid-size companies and you are a F500, or vice versa, then they might not be a good fit for you. That’s where you have to do your market research and focus your pre-qualification RFIs — on the business, market, services/support, and other non-tech factors that are relevant to you. With SolutionMaps you know that if a vendor does well, you don’t have to ask 500 feature/function questions in the pre-qualification RFI, only general questions about the vendor’s confidence and capability to support the key processes you are looking to digitize and automate.

Our goal in creating SolutionMaps (and the doctor led the creation of the majority of the common platform elements; the sourcing, supplier management, and analytics maps; and the first iteration of the CLM map, that has only changed about 30% since) was to flip the traditional technology platform RFI process in Procurement on its end as we saw too many companies focussing too much on tech (usually starting from free meaningless feature/function RFIs), which they didn’t know, and not enough on their business needs, which only they know. With SolutionMaps, they have confidence in the technical capability of the vendors, and can focus on everything else that’s important to their organization (and not the subjective whims of an analyst who has to rate a large number of relatively non quantifiable factors. Since all of the elements we evaluate have a pre-defined technical scoring scale, all analysts evaluate the technical capabilities equally and the maps are computed using pre-defined mathematical formulas with no analyst input whatsoever once the scoring is done).

In other words, the maps were designed to help you as practitioners identify a group of vendors to send a pre-qualification RFI to, not for vendors to use as marketing tools (but they certainly can, as it’s undisputable proof they have a great platform if they show up).

So, as you can imagine, after every release,

The Vendors They Are Complainin’