Author Archives: thedoctor

Why Is China Going to Beat the US in GDP Very, Very Soon?

If market trends continue, China is very likely to overtake the US in GDP by 2025. Why is this?

Is it because China has 1,351 Million people compared to the US population of 314 Million?

Is it because the world is still aggressively outsourcing to China?

Is it because China controls 90%+ of the global supply for some of the increasingly important rare earth metals?

Is it because China is effectively balancing socialism with capitalism?

Is it because they have manufacturing plants the size of small cities?

Is it because they run on five-year plans designed to improve the overall state of the country every five years?

Is it because they recognize not only the importance of public health-care but the importance of getting it right?

Is it because they realize that you can effectively defend your country on 6%- of your budget (and 2.2% of their GDP) compared to the US that needs to spend 11%+ of their budget (14% of revenue and 4.4% of their GDP)?

Is it because the populace is actively protesting GM (Genetically Modified) food?

Is it because they are pushing ahead on R&D and exploration (having landed the first spacecraft on the moon on December 13 for the first time since Russia landed Luna-24 in 1976)?

It’s all of these reasons, and more. While the US media is too focussed on the scandal of the day, the Chinese media, while censored, is more focussed on the issues. While the political parties in the US squabble over minutia and blame each other for the government shutdown that just occurred, and the one that is likely to happen in January, the one party system in China is discussing amongst itself how best to move forward (and keep the necessary control). While the US is on the verge of another energy crisis, China is building new power plants, including those that run on renewable energy sources, as fast as it can.

Now, SI will be the first to admit that China is not without its problems. It still has way too many coal-producing power plants, too much smog in its big cities, limited freedoms (especially where the press is concerned), urbanization issues (as it is still building cities it doesn’t yet need to keep people employed), logistics challenges, and so on. But compared to the US, where the republicans and democrats spend all their time blaming each other and fighting instead of working together to advance the country, where the government apparently spends too much time and money spying on its own citizens and pursuing controversial drone technology instead of fostering better inter-agency cooperation, public support for homeland defence initiatives, and scientific research endeavours, and where education spending often gets the shaft (with the Department of Education budget typically clocking in at under 2% of GDP), China is making more progress, and doing so faster, than the US.

If the US wants to retain its top spot on the economic powerhouse rankings, once the elections are over, the elected representatives have to work together to do what’s best for the country, otherwise, despite all of the limitations of socialism that one can identify from a free market perspective, China is going to win, and win big, and do so at the expense of the US.
While it may be an inevitability that China overtakes the US in GDP at some point in the future, it doesn’t have to be the near future, but unless the US makes a concerted effort to shape up from a global perspective, and forces its politicians to grow up, we may all need to start registering in Mandarin classes very soon.

FREIGHTOS: Helping to Bring Freight Into the Modern Era

Freight is often the bane of the Procurement professional, especially when such professional needs a quote in a hurry. It’s not uncommon even in this day and age for a Procurement professional to call up a freight carrier for a spot quote and have to wait two or three days. It’s absurd. Quotes, or at least quotes on standard table rates, should take two or three seconds. The only time you should wait a couple of days for a quote is during a master contract negotiation for hundreds of lanes, as you will want to give the carrier some time to determine their absolute best rate in this situation.

This is the primary reason BuyTruckload.com was founded. The founders, veterans of the logistics management software industry, got fed up with both having to wait for bids on the spot market and being unable to shop the business to enough carriers to get the best rate.  But this isn’t an article about BuyTruckload.com, even though BuyTruckload.com does a wonderful job in North America. Why?  Because BuyTruckload.com it doesn’t solve the global shipping problem, doesn’t address other modes of transit, and it doesn’t account for the fact that you might have contracts in place (that the buyer might not even be aware of).

In order to address this problem and speed up the freight quote time, on or off contract, in the global market place, Zvi Schreiber and his team built FreightOS (pronounced Freight O.S., or even freigh-toss, as it is a freight operating system and not a brand of breakfast cereals), which is an technology platform that enables an on-line network of global freight carriers to provide instant spot-rate and on-contract quotes when a (potential) customer needs them.

When a carrier, or freight-forwarder / 3PL,  signs up for the FreightOS network and uploads their standard rate tables for ocean, air, and land-based shipping for all of the routes they service, customers can access the carrier’s portal on the FrieghtOS network and get almost instantaneous quotes (which, depending on the number of routing options and shipment goal — be it lowest cost, fastest delivery, etc. — could take a few seconds) for the route(s) of their choice. All the buyer has to specify is the origin, the destination, some basic load characteristics (what is being shipped [boxes, pallets, etc.], dimensions, unit weight, and quantity), the desired pick-up date, the allowable modes (land, ocean, air, or any combination), whether or not the load is hazardous, if insurance is required (and the load value if it is), the applicable HS code(s), and if a customs brokerage is being used and click a get quote button. Within 10 seconds, the buyer will get the quickest delivery quote, the cheapest quote, and, if applicable, some suggestions for nearby delivery locations that are quicker or cheaper (especially in the case of inter-continental shipments where there are multiple options that require a multi-modal delivery network that consists of air or ocean and truck or rail). Each quote returned will include the total cost, the time-in-transit, the modes of transportation required, and whether or not the carrier will work with a customs brokerage or transport hazardous material. Clicking on a quote will break it down into its constituent cost components, which may include, but are not limited to, basic freight cost, (airline) screening fees, (airline) security fees, fuel surcharges, documentation fees, (airline) handling fees, export declarations, advance manifest fees, etc. If the buying organization has a contract with the carrier, even if it only covers some lanes, they can upload the contract and all of their buyers can get on-contract quotes instantaneously and compare them to off-contract quotes. This can help the buyer discover whether a different routing can save them some money.

Also, after the buyer has requested quotes from their (preferred) carriers of choice on the FreightOS network, they can download their entire quote history to an excel spreadsheet to not only do a lowest-cost cross-carrier comparison by lane, but determine where the real (hidden) costs are. For example, it’s possible that (one of) the biggest cost(s) (in air freight in particular) is the fuel surcharge, and if the buyer can identify this and negotiate a better fuel surcharge rate with a carrier of choice, they could potentially lower their shipment costs going forward. Also, in the case of exports and imports, a buyer can see if any of the security or documentation fees imposed by one carrier are (unreasonably) higher than the market average.

Right now, the FreightOS platform has approximately 20 carriers on-board, but considering the huge cost savings this represents to a carrier that spends a considerable number of man-hours every day quoting on business for which it knows it will only see a 20% to 30% success rate at best, it shouldn’t be long before more carriers sign up. With this type of platform, no man-hours are needed to provide market-rate quotes and the carrier will know that when they do get a call based on a quote provided by the platform, the buyer has product she needs to ship, has decided that the carrier may be able to provide the service she needs in an acceptable price range, and has narrowed her pool of carrier choices down to select few. The founders of FreightOS believe that they can increase the success rate of their carriers by 10% with this tool, but SI believes that this tool could increase a carrier’s success rate by as much as 50% as most buyer’s will only call, at most, the 3 lowest quoting carriers and select the first carrier that can meet their delivery requirements at an acceptable price.

If you have global freight and need a better quoting solution than calling up a carrier who will take, on average, a day or three to get back to you, SI recommends checking out FreightOS. It’s definitely a platform to watch.

Are You Losing 2% of Your Revenue to Fraud? Are You Sure?

Between two thirds and three quarters of organizations experience fraud every year and the average organization affected by fraud loses 2.0% of revenue in the UK and EU and 1.7% in the US. This means that, even if your organization is not aware of fraud, there’s still a 66%, or more, chance that it is being defrauded. And it should know for sure, one way or the other. Because if fraud isn’t detected, dealt with, and discouraged quickly, you end up with headlines like this:

  • Alibaba.com CEO And COO out because of vendor fraud
    involving over 2,000 suppliers and 100 staff members
  • Former Vodafone employee facing fraud charges
    for the fraudulent requisition of €2.3 million of services
  • The great Sainsbury’s potato fraud:
    Jail for vegetable buyer who took £5 million in bribes

Which all have one thing in common — each of these frauds involved the payment of millions of dollars to fake suppliers. Not over billings, not duplicate billings, fake billings from fake suppliers. A situation that can easily be prevented with a good supplier information management or supplier visibility system that validated the accuracy of the supplier information and the legitimacy of the supplier. If the supplier information management and visibility system cannot validate the existence and legitimacy of the supplier, then AP knows that a detailed manual investigation should be undertaken before the supplier is authorized to submit invoices, and that such authorization should require at least two sign-offs by high-level personnel. This simple process, which is yet another example of the value of supply chain visibility, would prevent fraudulent invoices from non-legitimate suppliers from ever getting in the system and greatly decrease the organization’s exposure to fraud.

And this is only one example of the many types of savings opportunities that good Supply Chain Visibility can bring your organization. For a deeper insight into the other ways in which Supply Chain Visibility can bring your organization recurring year-over-year savings, download SI’s latest white-paper on The ROI of Supply Chain Resiliency: It’s More Than You Think, sponsored by Resilinc. You might be surprised at just how much hidden value you can extract from your Supply Management operations with good visibility and resiliency.

MarketMaker4: The Mid-Market’s Market Making Mezzanine

Some of you might say the e-Sourcing space is too crowded. And that certainly was the case in the mid-zeroes — platforms here, platforms there, platforms platforms everywhere. But then came the acquisition frenzy where mid-sized players swallowed smaller players and start-ups before getting swallowed up in turn by the dominant players who, in the last couple of years, themselves were swallowed up by the massive enterprise software providers. As a result, there is an opportunity, especially in the NA (North American) market for a couple of new players – provided, of course, that such players bring new and innovative solutions to the table (that address the needs of a considerable market segment).

As a result, even though the EU (European Union) vendors are starting to enter the sourcing market in a big(ger) way in NA, there is still an opportunity for someone new if they go about it the right way. So, despite the fact that many thought the market almost dead at the end of the zeroes, it was not completely crazy that a small team of e-Sourcing market veterans, including Mr. Alan Buxton who was the CTO of of Trading Partners back in their heyday, decided in 2011 to start a brand new e-Sourcing software start-up and build a new solution from scratch.

Two years later, MarketMaker4 is a strong offering for the mid-market that needs a new, modern, e-Sourcing solution. In particular, those mid-market companies that are late to the e-Sourcing game, those that are still relying on third parties to manage their sourcing events and are ready to bring those events in house, those that are trying to use ERP sourcing solutions, and those stuck on platforms that, due to acquisition, are stuck in integration limbo and haven’t been upgraded in a while.

So what is MarketMaker4? It’s a four-part sourcing solution that consists of:

  1. A modern e-Negotiation platform
    with a best of breed e-Auction and RFX solution
  2. with a built in supplier discovery engine
    built on the entire D&B database which is augmented with your own supplier database
  3. and market data indices that span commodities and currencies
    that let a buyer know current prices, historical trends, and relative market conditions (when the data is available)
  4. that is augmented with real-time product and sourcing support 24/7/365
    through online chat that connects all of the global support representatives around the world that are currently online.

The MarketMaker4 founders, who were involved in the space for over a decade and who worked for both software providers and services providers learned the following:

  1. While some companies will start with services to get going, these companies will eventually decide that pay per drink is expensive and look for software.
  2. The companies switching from services to software will typically select a best-of-breed software provider with little or no services or support beyond the product. As a result, due to limited sourcing and product knowledge on the in-house buying team, the product typically gets under-utilized and the company fails to achieve the ROI they expected.
  3. When the license expires, the company will typically revert back to a pay-per-drink, but limited to high-value categories, or put its faith in a good e-Procurement system, that will reduce maverick buying and, hopefully, with limited RFX capability, lead to better buying habits.
  4. But even if the company moves to a modern e-Procurement system, the company will typically have little insight into current prices or suppliers that they aren’t already buying from.

As a result, the team decided what was really needed for these types of companies was:

  • An e-Sourcing solution that was easy to use by the average buyer,
  • augmented with real-time support and guidance as new buyers get up to speed,
  • integrated with market index and currency index data (that could be linked into cost models), displayed in easy to understand graphical representations, that the buyer could use to understand current prices and likely trends, and
  • extended with a huge database of potential suppliers.

And that’s what they built. And in each component, they added some innovation to the mix.

  • The e-Auction product, which consumerizes the enterprise capability, is one of the most powerful on the market, with one of the most sophisticated, but yet easy to understand at a glance, interfaces out there.
  • While chat-based, they chose to build a support solution that connects all of their services and support personnel around the world who are currently available rather than use a call-center model. (And as they were just acquired by Xchanging, one of the big players in the Procurement market who are leaving MarketMaker4 as a stand-alone product and company, they now have a large network of support personnel around the world who speak multiple languages and can support their customers in their native language.)
  • Their market index solution is linked into the RFX/Auction module so that the buyer can see current component / raw material prices if there is a market index and can see current currency values as well as trends over the last year for every currency a supplier might bid in.
  • And they were the first e-Sourcing platform to integrate with D&B for the purposes of supplier discovery. Up until they did, most integrations were for risk data or data enrichment. As a result of their partnership and early efforts, they have one of the more powerful integrations and in addition to being able to search on name, location, etc. they can also filter on a variety of dimensions, including risk, size, diversity, etc. that even D&B can not filter on through their API.

MarketMaker4’s e-Auction product and supplier discovery products in particular are quite innovative, and SI will dive into them in more detail in the new year.

The Future of Packaging is All About Labelling … At Least For Now

DC Velocity recently ran a short article on the “10 global trends that are shaping the future of packaging” that was quite interesting, but for the near future, not that relevant — especially to Procurement and Logistics.

For example,

Big Science will continue to discover lighter and stronger substrates, which will eventually allow packaging to be reduced, but the time it takes between the time a new substrate is discovered until it is mass produced at a competitive cost is typically a decade. No big changes are coming in the next few years.

The eco agenda has been pushing environmental concerns for a couple of decades now. The eco agenda is not going away, but, unless your corporation is damaging the environment more than the competition, it’s not going to change its behaviour until it is more cost effective to do so with near-term results. In other words, until someone invents a significantly more environmentally packaging alternative that is stronger and cheaper than what is currently in use, no changes are expected as a result of the eco agenda.

Developments in Neuroscience will allow for the design of more enticing packaging, but that design will predominantly revolve around the graphics, colours, and messaging on the packaging, as you can’t securely ship a square item in an oversized round sphere without padding and adding undue cost to the process. As a result, regardless of what the still inexact science of neuroscience tells us, there will be no change to the packaging in the near future, just what is printed on it.

Demanding Consumers will always want more, but now that every smartphone has a free barcode scanning app, all you have to do is slap on a q-code or a barcode and, voila, they user can be taken to a dedicated web-page. Again, no changes to the packaging, just what is printed on it.

Unless your packaging contains dangerous chemicals, which should have been taken out years ago with the introduction of RoHS and similar acts around the world, More Legislative Oversight is only going to add more labelling requirements in the short term, especially in F&B and CPG. The oversight is not going to fundamentally change the nature of packaging for most products in most industries (unless a new chemical is deemed harmful and restricted for use in packaging).

SI could go on, but packaging is not likely to change much in the next few years, just like it hasn’t changed much in the last decade. Emerging markets, the rise of the BRIC, and new retail models will eventually spur a packaging renaissance, but not until there is a crisis or radical new breakthrough to drive it. In the interim, the focus will be on labelling — exceeding the legislative concerns to appease the more demanding consumer and doing so in a way that is attractive and calming.

Anyone have any good counter-arguments?