Technology Damnation 94: New Industrialization Era

Progress is good. Innovation is good. Invention is good. Until it destroys your business model. And that’s what’s about to happen, because unless the supply chain can adapt, the organization won’t survive. Because it’s going to be spotted by the supply chain first, it’s going to impact the supply chain first, and it’s going to distort the supply chain first. In fact, the new industrialization era is already revolutionizing global supply chains, and if your company hasn’t caught up, it may soon end up in the obituaries. Even some of the largest companies in history couldn’t survive the changes brought on directly and indirectly by technological shifts, including the South Sea Company (which was, adjusted for inflation, the third largest company in history in 1720), the Mississippi Company (which was, adjusted for inflation, the second largest company in history, also in 1720), and the Dutch East India Company (which was the largest company in history, adjusted for inflation, in 1637). These were all bigger than Apple, Microsoft, Google, and Facebook — which could all become blips in future decades. And even if you survive, you can fall from great heights to obscurity. Consider the Hudson’s Bay Company, founded in 1670. It’s still around, and has assets worth almost 8 Billion, but even a considerable number of Canadians aren’t likely to mention it, if they even know if it, if asked for prominent Canadian companies, instead citing companies such as Tim Hortons (sold again for 11.4 Billion last year), Imperial Oil, the Canadian National Railway, and Rogers (if they don’t realize that our biggest companies are actually are banks).

Three changes in particular are going to disrupt your supply chain in the near term, so if your supply chain is not ready, it better get ready. In no particular order they are:

3-D Printing

Those of you following SI’s landmark series on The “Future” of Procurement and the “Future” Trends Expose which basically clarified once and for all that the vast majority of “future” trends that were being touted by the average analyst, blogger, speaker, and vendor were actually trends that were years old, decades old, and, in some cases, centuries old and that while a handful were still relevant (as they are still emerging and only affecting the leaders), only a few trends being touted as “future” trends were actually recent enough to still fall into that category. One of these was 3-D printing.

As stated last September, while 3-D printing is not a new technology, as this year is its 30th anniversary, it was only in the last decade that it became accessible to more than a handful of businesses and only within the last few years that it has become widely accessible and affordable. Now that the technology is becoming mainstream, it’s entering a rapid maturization phase in which it’s going to become better, faster, cheaper, and infinitely more powerful. As a result, prototyping is not only going to become more rapid, but more powerful. Engineers will be able to iterate through multiple prototypes in rapid succession without having to wait six (6) weeks for the next iteration from the plant in China. Not only will this support the increasingly shorter and more complex product life-cycles, but it will help reduce failure risk and associated costs, and increase innovation potential as now you can try the product before you commit to a production run.

Robotics

Robotics is not new, and many factories, such as automotive plants, have been investing in automation for decades. But recent increases in computing power, hardware production, and control systems coupled with open source systems such as Arduino have revolutionized the ability for even garage start-ups to build elaborate control systems, create advances in robotic automation, and even unmanned vehicles for air, sea, and inhospitable (volcanic) environments. Space age developments can literally be done in a garage workshop. So it won’t just be your largest competitor that you have to fear, but an unknown start-up that can revolutionize a production process and decrease the cost of production by orders of magnitude.

Bio-Plastics

Bio-plastics are new age plastics that are derived from renewable biomass sources that are more environmentally friendly (as they are biodegradable) than petroleum base plastics. Although they are currently more costly, and in some case, more environmentally damaging to produce than traditional plastics, the inflection point is coming and then your competition is going to have cheaper packaging that is more accepted by the market than you. And while the focus now is on packaging and industries like electronics and automotive where injection moulding is required, they could even have applications in medicine. Think about liquid bandages. Variations of bio-plastics might lead to the (accidental) discovery of better, and safer, polymers. Bio-plastics might have less risk of leaking when used in casts. And so on.

And this is just the first wave of disruptive innovation that your supply chain has to deal with. More waves are coming. While progress is wonderful at a societal level, for those organizations not ready, it’s damning since the very nature of innovation means that for something new to emerge, something old has to die.

Before Panama, There Was Kiel

The Panama Canal might be the best-known man-made artificial waterway, but before the Panama Canal, there was the Kiel Canal, which is the busiest artificial waterway in the world that is a 98km long freshwater canal in the German state of Schleswig-Holstein that was officially opened 120 years ago today (even though it wasn’t really finished until the widening project was finished in 1914) and connected the North Sea to the Baltic Sea. This was, and is, an important canal because it saves an average of 460 km and allows ships to avoid dangerous storm-prone seas.
As a point of comparison, the Panama canal, which was initially started in 1881, was put on hold until 1904 when the US took over the project abandoned by France and not opened until August 15, 1914, almost twenty years later.
In shipping and logistics, we take these canals for granted, but most are rather new in the grand scheme of global trade.

Environmental Damnation 18: Natural Disasters

Natural Disasters are on the rise. As per a 2011 publication from THINK Executive, from the 1970s to the 1990s, the number of natural disasters occurring worldwide has tripled. It is predicted that both natural and man-made disasters will increase five times in the next fifty years. Ouch!

Why? First of all, we’re still polluting and major energy and raw material consumers, including the USA, China, and India still won’t sign the Kyoto Protocol. This means that continual extreme climate change (which is better terminology than global warming because that’s only one * of extreme climate change) which brings category 5 hurricanes, tsunamis, deadly heat waves, and blizzards with snowfalls worse than any in recorded history are going to continue to occur on a regular basis.

Secondly, while there have been a number of earthquakes above 8 in recent years, there have only been two really deadly earthquakes since the 1976 Tangshan earthquake – in particular, the Kashmir quake of 2005 and the Haiti quake of 2010. But the tectonic plates are in constant stress and while it can never be predicted when they will slip, they will slip and the quake will be devastating. And not only is it likely that hundreds of thousands or millions of people will be seriously injured, or killed, but the region it hits will be entirely devastated. An entire city can be destroyed over night. Every office, every plant, every warehouse, and every truck when the road they are on is swallowed up.

Thirdly, and following on the last point, a considerable portion of the worlds population lives on the ring of fire — the west coasts of North and South America, the east coasts of russia and China, and a considerable part of Australasia. About 12% of Canada’s post population lives in BC; about 16% of US population lives on the west coast; Chile, Peru, Columbia, and Venezuela are almost entirely coastal; Korea, Japan, Taiwan, Philippines, Vietnam, Cambodia, Thailand, Laos, Myanmar, Malaysia, Singapore, Indonesia, Papua New Guinea, Bangladesh, Sri Lanka, New Zealand, and habitable Australia are almost entirely coastal; and a considerable portion of India’s and China’s population are coastal. Not only is this area at high risk of quakes, but it’s at high risk of devastating volcanic eruptions as well. The 2010 eruptions of Eyjafjallajökull were nothing in comparison to the devastating eruptions that have happened in the past. While there are not that many disastrous eruptions on record, the Krakatoa eruption of 1883, which was heard up to 3,000 miles away, destroyed most of the island, unleashed tsunamis which killed more than 36,000 people, and spewed clouds of ash into the sky more than 6 miles high which lingered for months. And almost everyone knows the story of Pompeii which was buried by an eruption. While the most devastating eruptions are a lot less frequent than devastating earthquakes, occurring as infrequently as every 50,000 years as compared to every 50 years or so, even an eruption as powerful as Krakatoa could disrupt supply chains in the region for a year or two.

We could go on, but you get the point. Disaster you can’t prevent, and likely can’t even predict, is always in the shadows, waiting for the worst possible time (when everything else is going wrong) to strike.

Organizational Damnation 60: Human Resources

Does the doctor even have to write this post? I’m sure many of you are already cringing from the title knowing how an overly process driven human resources department, free of logic and common sense, can ruin the best and worst of plans and inspire your best talent to run to the hills and run for their lives.

Why do human resources often bring damnation to Procurement? Simply put,

  • They exacerbate talent tightness. (Societal Damnation 51)
  • They drive talent away. (Societal Damnation 50)
  • They think they know what Sourcing is.

They exacerbate talent tightness.

HR will insist on owning the talent recruitment process. Now, it’s true that, in most organizations, HR should own the process because most departments wouldn’t know how to go to market for talent if the market came to them and bit them on the thigh like a boghog of NowWhat, but a good Procurement organization knows how to go to market for talent. In fact, a good Procurement organization knows how to go to market for everything the organization needs, and, more importantly a good Procurement organization knows what defines talent to the organization.

But this isn’t the problem, it’s the way that many non best in class Human Resource organizations go about the talent hunt. They blast a poorly written advertisement with a list of requirements no living or dead human can meet across multiple channels, collect hundreds, if not thousands of resumes, and then go through a last-man standing vetting process. They create a ridiculous checklist, a set of arbitrary rules for checking the boxes (because they don’t understand what the boxes are), and then eliminate every resume that doesn’t check every box. They then interview the last men, or women, standing, eliminate those that they feel won’t be a good organizational fit (based on gut instinct), and pass you the candidates that remain.

This is almost guaranteed to eliminate a large number of good candidates, if not the best candidates, because Procurement doesn’t need a candidate that checks all the boxes, training can often handle that, it needs a candidate with the aptitude to learn what he or she doesn’t know because organizational needs are always changing and no Procurement professional will ever know everything he or she needs to know.

They drive talent away.

Many HR organizations institute policies that are so onerous, they will drive every individual in the organization insane. These will typically take the form of expense claims and pre-performance review. In the latter case, these will take the form of ten page questionnaires asking the individual to update their resume in detail and list all changes since the last review, describe all of their accomplishments since their last review, list the top ten reasons they deserve a 2% raise, do a 360-degree review on their boss, rate the HR process, etc. until they want to scream and jump out the 10th story window. In the former case, since the review agony comes at most once a year, they will insist on nonsensical requirements for even the simplest of rebates. For example, some organizations have a policy that, in order to get an expense claim reviewed, every employee had to send in an envelope with their expense receipts (and their name on it) stapled to the expense claim to get a refund. This sounds like a good policy, since good fiscal accountability means that receipts should be provided for any expense over a nominal amount, until it’s enforced to the extreme. And some organizations enforce this to the extreme. For example, as described by Sigi in his recent book (reviewed in Gettin’ Sigi With It), one organization refused to honour an expense claim without an envelope, even if their was no receipt. For example, Sigi recounted the story of when one of his team members came to him with a printed e-mail that said an empty envelope with the team member’s name on it was required to be sent in by the team member to get his mileage claim reimbursed. Wow!

They think they know what Sourcing is.

In some organizations, it is HR that thinks they do the Sourcing because, as far as they are concerned, Sourcing is the process of acquiring talent and nothing else. So if you say you do Sourcing, they try to beat you down and kick you unconscious. It’s crazy.

the doctor could go on, but you get the picture. Human Resources is yet another damnation Procurement has to live with. They are the gatekeeper and we are still waiting for the key.