Post-ZIRP World!

Inspired by THE REVELATOR and Alan Buxton. (See the post AND the comments!)

To the tune of Perfect World by Huey Lewis and the News.

Everybody’s afraid of
the Post-ZIRP world
Where you can’t have
everything your heart desires
The perfect pitch won’t get the big raise
And the perfect plan won’t set the world on fire

Well, what you gonna do,
when one and one makes two
And the vision of the future
is low utility fees
No Co’s perfect,
not even a perfect fool
If you can’t serve results
They won’t keep the faith in you

Ain’t no bullsh!t in a post-ZIRP world
There weren’t no ZIRP world anyway
Ain’t no bullsh!t in a post-ZIRP world
But keep on dreamin’
of living in an all ZIRP world

Everybody’s got secrets
Now you know that it’s true
They talk about AI
They talk ’til they’re blue
Something happened to the pledges of trust
Down through the years, they began to rust

Now here we are, amid the fears and the laughter
Still waiting for our happily ever after
They’ll keep on dreamin’ as long as they can
Try to remember and you’ll understand …

Another BRIC in the wall!

We don’t need no education!
We don’t need no thought control.

And we don’t need no American Dollar.
We don’t need no OPEC zone.
No cold war dogma in the classroom.
No arbitrary acetone!

As a result of “first-world” “western” policies, “populist” politics, arbitrary “sanctions” (which are then bypassed through intermediaries), arbitrarily choosing of sides, forced “democracies” (even though the ring-leader isn’t a democracy), etc., many countries are getting fed up of the “West” and petitioning to join the BRICS. What started as a union of Brazil, Russia, India, and China in 2006 (and then expanded to South Africa in 2010), this year saw Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates join the ranks after being invited to join on January 1. (This followed reports last year that over 40 countries have expressed interest in BRICS, and almost half of that number have bid for membership.)

As of now, the BRICS countries represent roughly 45% of the world’s population and 28% of the world’s economy. (That’s more than the US portion of roughly 25% or the EU portion of roughly 19%, and way more than the UK’s portion of about 2%.) Within a few years, the BRICS will likely gobble up a considerable portion of the 26% not in the EU, and could soon represent close to 50% of the world’s GDP and 80% of the world’s population).

A seismic shift is coming and the BRICS, especially if they adopt a central currency, will soon set the global economic standard (despite the denials of the US and EU). Are you ready? (Answer: you’re not, but you should start preparing your global supply chains now so you are when the time comes.)

I don’t need no arms around me
And I don’t need no drugs to calm me.
I have seen the writing on the wall.
Don’t think I need anything at all.
No! Don’t think I’ll need anything at all.
All in all it was all just the new BRICS in the wall.
All in all you were all just the new BRICS in the wall.

Advanced Supplier Discovery Yesterday — No Gen-AI Needed!

Back in late 2018 and early 2019, before the GENizah Artificial Idiocy craze began, the doctor did a sequence of AI Series (totalling 22 articles) on Spend Matters on AI in X Today, Tomorrow, and The Day After Tomorrow for Procurement, Sourcing, Sourcing Optimization, Supplier Discovery, and Supplier Management. All of which was implemented, about to be implemented, capable of being implemented, and most definitely not doable with, Gen-AI.

To make it abundantly clear that you don’t need Gen-AI for any advanced enterprise back-office (fin)tech application, and that, in fact, you should never even consider it for advanced tech in these categories (because it cannot reason, cannot guarantee consistency, and confidence on the quality of its outputs can’t even be measured), we’re going to talk about all the advanced features enabled by Assisted and Augmented Intelligence (as we don’t really have true appercipient [cognitive] intelligence or autonomous intelligence, and we’d need at least autonomous intelligence to really call a system artificially intelligent — the doctor described the levels in a 2020 Spend Matters article on how Artificial intelligence levels show AI is not created equal. Do you know what the vendor is selling?) that have been available for years (if you looked for, and found, the right best-of-breed systems [many of which are the hidden gems in the Mega Map]). And we’re going to continue with Supplier Discovery. (Find our series on Advanced Procurement — No Gen-AI Needed! Yesterday, Today, and Tomorrow and our series on Advanced Sourcing — No Gen-AI Needed! Yesterday, Today, and Tomorrow through the embedded links.)

Unlike prior series, we’re going to mention some of the traditional, sound, ML/AI technologies that are, or can, be used to implement the advanced capabilities that are currently found, or will soon be found, in Source-to-Pay technologies that are truly AI-enhanced. (Which, FYI, might not match one-to-one with what the doctor chronicled five years ago because, like time, tech marches on.)

Today we move on to AI-Enhanced Supplier Discovery that was available yesterday (and, in fact, for at least the past 5 years if you go back and read the doctor’s original series, which will provide a lot more detail on each capability we’re discussing). (This article sort of corresponds with AI in Supplier Discovery Today that was published in March, 2019.)

YESTERDAY

Smart Search

As penned in the original, while this is not really AI in any sense of the definition, extremely powerful searching and faceted filtering can really help an organization find the information, or in this case, the suppliers they are looking for. In the early days, searches were super simple — suppliers for product X in this category. If you wanted something like “suppliers in eastern Europe which supply widgets and sprockets with a third party financial risk score of 3 or less that is ISO UVWXY certified with a maximum carbon output per unit of Y”, forget it. You’d get a starting list of all suppliers in all of Europe that supplied widgets or sprockets (and not necessarily both) and have to vet them one by one.

But, thanks to advances in processing and database tech, traditional semantic processing, and tagging, you can now do multi-faceted searches across multiple dimensions on million record plus databases in less than a second, and do regex processing of associated descriptions for key words or phrases for specific requirements not tagged or indexed. And all of the semantic indexing and tagging can be done with traditional semantic analysis and custom trained last gen neural nets (and done with very high accuracy).

Community Intelligence

Like searching, while most of this technically doesn’t require ML/AI, community intelligence that spans ratings, capability verifications, (past) inter/intra organization relationships, and buyer sentiment can be quite useful to a buyer. It’s not just a group of suppliers that seem to meet your requirements of “suppliers in eastern Europe which supply widgets and sprockets with a third party financial risk score of 3 or less that is ISO UVWXY certified with a maximum carbon output per unit of Y”, it’s a group that will actually meet your needs, and the best way to zero in on that group is to use community intelligence from other buyers who have used the supplier and can provide valuable feedback on their capabilities and performance.

Most of this doesn’t require any ML/AI at all as it just requires ratings, feedback on various dimensions, recording of products and services used, etc. Only the sentiment analysis requires the AI domain, and it’s just building on semantic context analysis, which uses semantic processing and customized neural nets to predict sentiment (to detect things like sarcasm, etc.).

That Was It, Folks!

In the early days, Supplier Discovery was overlooked when it came to ML/AI, because it was not seen to be as important as sourcing, procurement or supplier management (because you knew who the suppliers were, you just needed to manage them better). However, as the leaders realized that the best opportunity for innovation was often in the supply chain, focus switched to supplier discovery and real ML/AI worked it’s way in.

SUMMARY

Now, we realize this was very brief, but again, that’s because this is not new tech, that was available long before Gen-AI, which should be native in the majority (if not the entirety) to any true best-of-breed Supplier Discovery platform, that is easy to understand — and that was described in detail in the doctor’s 2019 article for those who wish to dive deeper. The whole point was to explain how traditional ML methods enable all of this, with ease, it just takes human intelligence (HI!) to define and code it.

Does Logistics Management Understand Procurement Better than Most Procurement Publications?

A recent Logistics Management Article on The State of Procurement in 2024, starts off with Procurement is fundamental. It spans everything from day-to-day purchases to measuring sustainability to future-proofing operations for long-term growth. It’s a wide spectrum of mission-critical responsibilities, spanning all business functions.

As we noted in our recent article on The Future of Procurement is the Past, Procurement is at the heart of the business. It’s always been a core function and always will be. And once businesses realize that the key to sustained profitability going forward is getting back to basics, it will be again.

And while the article says “Procurement is transforming at lightning speed“, it’s only partially right … leading Procurement departments are transforming their technological baseline at lightning speed to become more efficient and effective, but they are not changing the core, strategic function they perform, they are just implementing processes and tools that allow them to perform those core, strategic functions more efficiently and effectively.

Why? According to the article, which quotes Gartner, its due to the intersection of accelerating changes in risk management, ESG, and technology and the complexity and challenges of keeping up. The internal challenges — such as system complexity, a wide range of vendors and products, and compliance requirements — and the external challenges — rising costs, unexpected economic changes and CSR mandates, and changing digital procurement needs — are increasing by the day.

As a result, many Procurement departments have been going through transformations, sometimes two or three at a times, but not all are turning out as planned. This is because, as the article notes, most of these projects focus on implementation, and not the reason for; relies too heavy on staff(‘s lack of) experience and implementer inexperience; buys into the vendor’s “one size fits all” approach; and leaves workflows incomplete. Digital is not an option, but how you approach it is. The article emphasizes simplicity, quoting Gartner’s statistic that organizations that employ design simplicity have a 42% increase in success, but that’s just part of the picture.

As per our previous articles, it’s not just simplicity, it’s focus on what is needed, why, and vetting the platform and the vendor against both. It’s putting the real need first, not the technology, and selecting the right technology for the job. Sometimes it might be AI, but most of the time it will be classic tech that’s been on the market for 10, or 20, years that has been honed over the years by a vendor laser focused on solving a subset of Procurement problems in the best way possible for companies in the industries, market size, and geography the vendor is focussed on. As the article notes, there’s no AI roadmap and, as such, significant care should be taken with any AI initiative.

It’s more critical as the article notes, to focus on better data analysis, efficiency, and system (and data stream) interconnection. The more insight you get, the better decisions you can make on system selection.

In other words, the current state is a challenging one, but that’s no different than what Procurement has been going through since the first commercial telephone interchange began operations in 1878. Procurement has always had to deal with change, the only difference now is that it’s coming harder and faster than it ever has. But it’s not like Procurement hasn’t always had to deal with or adapt to change, and it’s not like the best Procurement departments haven’t always done so, it’s just that the challenge has reached a new height. But as long as Procurement employs the same best practices they’ve always employed and does the right due diligence on any solutions they are considering, they will do just fine.

The Future of Procurement is the Past … With Just a Dab More Modern Technology

A recent article in the SCMR asked what is the future of procurement after reviewing a benchmarking report (or at least a press release) from McKinsey & Company on “Where Procurement is Going Next”.

The article quoted a statistic that companies excelling in procurement had a digital capabilities maturity score 40% higher in strategy, digital and data analytics compared to average performers. They also noted that this tracks with the first Procurement benchmarking survey McKinsey launched two decades ago which uncovered a clear link between procurement maturity and higher business performance. (Today, top quartile procurement maturity companies have EBITDA margins at least 5% higher than less mature peers.)

According to SCMR, McKinsey found that the priorities for the next 6 to 12 months is end-to-end margin management; next generation technology, data, and analytics; and talent and resiliency. Translation: focus on sustained profitable growth, make sure you have the right technology to support it, and don’t forget that talent is key to resiliency (or at least not until the budget gets tight and the first thing to be cut is the training budget and the next the compensation budget).

First of all, isn’t that what Procurement’s always been about? Supporting the business in a manner that allows it to be sustainable and profitable, using the tools at its disposal (good negotiators and couriers, then phones and catalogs, then faxes, then emails, etc. etc. etc.), and the right people for the job.

Secondly, now that the time of global expansion and growth is over, inflation is back with a vengeance that was unseen for two decades, global trade is disrupted on a daily basis, capacity is low (thanks to ships scrapped during COVID) and lower thanks to Panamanian droughts and the conflict in the Red Sea (and the renewed need to make the long, and sometimes dangerous, voyage around the capes), sustainability is critical in many jurisdictions, and the marketing mad men can only take your company so far, companies are realizing that they need to get back to basics.

And those basics are good operations centered on what is most important. If we go back to Business 101 (which, unfortunately, many of today’s founders and CEOs didn’t take or forget), businesses survive on profit and profit equals revenue minus expenses. Revenue is not infinite, which means the key to growth is NOT just revenue growth, but expense management. And expense management is good old fashioned Procurement.

Which means the future is the past. The future is that Procurement will regain its importance in any organization that not only wants to survive the increasingly turbulent and troubled times ahead, but thrive.

Procurement is at least the world’s third oldest profession, depending on whether astronomy came first or third, and, as we’ve been repeatedly saying, the core, and importance, has never changed. Not since the first known modern manual was published in 1887. Not since The Royal Mint was founded in what is now the UK in 886. Not since someone was first hired in an ancient metropolis by a businessman to buy goods on his behalf thousands and thousands of years ago. Buy usable, quality, goods and services the business needs at a fair price so that the business can sustain its operation profitably. And that’s where Procurement’s focus, and importance, will return. That’s the future. And it’s the past. Brush up on your history. The “tools” may change but the job remains the same.

We just have to survive Everything Louder than Everything Else.