Category Archives: Manufacturing

Don’t Abuse Lean and Mean — The Four Horsemen of the Shipocalypse Don’t Need Any Help!

If you are in Procurement or Logistics, you know that the time of cheap, fast, and reliable — which we had for almost two decades, is now long gone and likely to never return. That is because the four horsemen have turned their attention to global trade … specifically, global logistics … and have brought:

  • war: the conflict in the Red Sea, one of the two most important waterways in the world, has made most transport almost impossible
  • famine: the droughts in Panama, the other of the two most important waterways in the world, have reduced its capacity by at least 1/3 for at least 1/3 of the year
  • pestilence: plague has returned, taking down the necessary workers (and closing the necessary ports) with it
  • death: corporate greed and union response have stepped in here to bring certain death to global supply chains if things don’t change:
    • oil prices: the more they go up, the more unaffordable our dirty ocean freight becomes
    • limited capacity: greedy corporations scrapped ships during the pandemic for insurance claims, sometime ships that hadn’t even made a single voyage … and now that they’ve learned they can raise prices up to 10X pre-pandemic prices for a single container during peak season, and the richer (luxury good) companies will still pay the rates, they have no incentive to bring capacity back
    • union demands: inflation has been rampant, workers have been impacted, and they want their pre-pandemic buying power … and, as I’ve noted before, labour unrest and strikes is now one of the biggest risks in your global supply chain

As a result, the last thing you want to do is help the horsemen bring your supply chain to a a halt, but that’s exactly what you keep doing day in and day out as you keep pursuing, and applying, lean, mean, and JIT (just-in-time) where it doesn’t belong.

As noted by the author of this recent LinkedIn article on how you have (less than) two weeks to stave off supply chain chaos, we’re at the point where a one day stop in any part of the supply chain turns into one week to recover from, a one week stop in any part of the supply chain turns into one month to recover from, and a one month stop in any part of the supply chain totally f*cks us for a year! (Since the effects are not linear but exponential!) And it’s all your fault.

Lean and mean was supposed to be about efficiency in manufacturing and lack of waste, not slashing inventory to dangerous levels, not slashing capacity to dangerous levels, and was certainly NOT meant to be used by idiot MBAs (which stands for Master of Business Annihilation) with no concept of what the corporation does running global corporations off of spreadsheets alone!

So stop applying it to inventory and capacity! Thank you.

But What About the Oompa Loompas?

A recent article over on SupplyChainDive on Unwrapping Hershey’s $250M Supply Chain Upgrade noted that Hershey is undertaking a huge supply chain and manufacturing project to enhance agility and efficiency throughout its operations.

The goal is to digitize and automate Hershey’s processes, optimize procurement and manufacturing, and accelerate R&D and planning to boost visibility and streamline operations. The goals are better integration of demand planning and more automation in the supply chain. by the end of the process, , the goal is visibility from supplier to retailer (and back again).

This is not Hershey’s first mega project, as it has recently invested over One Billion Dollars in its supply chain network, investments that included a new chocolate facility, additional production lines, and line upgrades. It also invested in SAP S/4 ERP integration to get cross unit business visibility, including visibility into its acquisitions of Amplify Snack Brands, Pirate Brands, Dot’s Pretzels, and Pretzels Inc. in an effort to identify redundancy and unnecessary complexity in the supply chain.

At the end of the upgrades, Hershey expects to have over 95% of transactions flowing through one system, which will provide unparalleled visibility, as well as increased procurement and inventory management efficiency. In addition to better alignment of production with demand with inventory, it also helps Hershey with predictive maintenance schedules and production scheduling, as they can modify production runs as needed with shorter changeover times (due to improved visibility).

When all is said and done, Hershey hopes to save 300 million annually, with 30% of savings due to supply chain productivity improvements alone. This is all fine and dandy, and will put Hershey in a position its peers will envy, but what about the Oompa Loompas? The additional production lines, provided they created more jobs, were a good start … but we know those Oompa Loompas would like to return to the glory days of Chocolateering.  (And we know how much they have suffered for the past 20 years.  Just check out some of our historical posts.)

The Sourcing Innovation Source-to-Pay+ Mega Map!

Now slightly less useless than every other logo map that clogs your feeds!

1. Every vendor verified to still be operating as of 4 days ago!
Compare that to the maps that often have vendors / solutions that haven’t been in business / operating as a standalone entity in months on the day of release! (Or “best-of” lists that sometimes have vendors that haven’t existed in 4 years! the doctor has seen both — this year!)

2. Every vendor logo is clickable!
the doctor doesn’t know about you, but he finds it incredibly useless when all you get is a strange symbol with no explanation or a font so small that you would need an electron microscope to read it. So, to fix that, every logo is clickable so you can go to the site and at least figure out who the vendor is.

3. Every vendor is mapped to the closest standard category/categories!
Furthermore, every category has the standard definitions used by Sourcing Innovation and Spend Matters!
the doctor can’t make sense of random categories like “specialists” or “collaborative” or “innovative“, despises when maps follow this new age analyst/consultancy award trend and give you labels you just can’t use, and gets red in the face when two very distinct categories (like e-Sourcing and Marketplaces or Expenses and AP are merged into one). Now, the doctor will also readily admit that this means that not all vendors in a category are necessarily comparable on an apples-to-apples basis, but that was never the case anyway as most solutions in a category break down into subcategories and, for example, in Supplier Management (SXM) alone, you have a CORNED QUIP mash of solutions that could be focused on just a small subset of the (at least) ten different (primary) capabilities. (See the link on the sidebar that takes you to a post that indexes 90+ Supplier Management vendors across 10 key capabilities.)

Secure Download the PDF!  (or, use HTTP) [HTML]
(5.3M; Note that the Free Adobe Reader might choke on it; Preview on Mac or a Pro PDF application on Windows will work just fine)

It Was the Most Wonderful Time of the Year. Could it Be Again?

A couple of months ago we published an article on how ‘Tis the season … to bring an end to seasonality! (And JIT!) because, while consumer shopping may be seasonal, supply chains no longer support seasonality. The pandemic finally broke globally over-stretched supply chains and with the continued issues (lack of ships, due to scrapping; containers; due to trade imbalances; lack of capacity, due to extended shipping times now that the two major canals are not available and ships have to sail around both capes), the situation is not going to be fixed anytime soon.

In the article we noted that if you didn’t want to seasonally stock out, you needed to stop trying to stock seasonally and start planning for sustained stock up over time. Stock at the rate products are normally produced and able to be shipped. And stock to what you forecast.

But don’t stop there. If, even spacing out the orders and shipments, you can’t reasonably stock to demand, or, if the demand may not be high enough to minimize your logistics costs (via full container shipments), then you need to work on demand shaping as well as demand forecasting. Don’t over market / promote / sell a product you’ll have trouble delivering, and don’t maintain a product that isn’t going to optimize your economic order quantity.

Not everyone needs the newest product, or the top of the line product, some just need a product that works, which can be last year’s product, or the mid-line product. If you shape demand properly, through targeted marketing, targeted selling, or proper account management, you can make sure that you can meet all of your demand and keep each product line you should be maintaining profitable. And while we admit demand shaping can be harder than forecasting, sometimes it needs to be done. But it needs a lot of advance planning, so it’s critical that Procurement work hand in hand with Marketing and Sales to help identify the demands it can safely meet, when, and what demand levels are optimal for each product line. But if you integrate your planning, marketing, forecasting, sales, and supply chain planning, then maybe the holiday season will, in 2024, be the most wonderful time of the year.

Consumer Dynamics are shifting like never before. But how does that affect Procurement?

Beyond the obvious, of course. But let’s backtrack.

A recent article over on Fortune noted that consumer dynamics are shifting like never before while purporting to give us some insights from Executives from Instacart, Atlassian, Nordstrom, and Black & Decker [who] share their strategies. However, the insights it shared related to the challenging technology environment the companies, and teams, face daily and not the consumer market in general, which is a very important topic not covered much by most of the publications and analysts that focus on how great the technology (especially AI-backed technology that may or may not work at all) is, but not how it helps you address the consumers that your organization is in business to serve.

Now, it’s easy to track change in demand if you have a good POS system, a good inventory system, at least weekly (if not daily) synchs, and a good DiY (Do-it-Yourself) Analytics system with baseline trend analysis capabilities that can signal changes in demand, the need for rapid reorders to prevent stock-outs, and increasing changes in demand as a result.

It’s not always as easy to track why. Sometimes there’s a strong correlation between the sales and a particular campaign, between the sales and a sustainability initiative, between the sales and recent price decreases in the product line or price increases in a competitor’s product line, or between the uptick in sales and competitor stock-outs, and in this case it can seem obvious, even if it’s not. For example, the campaign may have had nothing to do with it, it could have been the result of a single influencer promoting the product. The sustainability initiative may have had nothing to do with it, as customers may have known it would only impact the next generation of the product. The price decreases may have had little to do with it because it may have already been one of the lowest priced products available at the time as well as the one with the best brand reputation. The competitor stock outs may not have had anything to do with it because those might have been the higher priced products that were only stocked in low quantities anyway.

Moreover, even if you can determine the why with some statistical confidence, that still does not identify the underlying root cause as to why customers reacted to the campaign, the sustainability initiative, the price decreases, or the stock-outs. Are customers shifting towards your brand, adopting a preference for certain products, responding to certain messaging, or just veering away from certain competitors (or at least certain competitor products).

More importantly, how can you predict these trends early, when they are just starting, so that you can make the appropriate Procurement decisions in time to meet the shift in demand better than your competition. Certainly predictive trend analysis (using traditional machine learning fine-tuned to your problem domain) will help, but only if you can identify the right data sets and indicators, which will also mean being able to detect shifts in early sentiment early. So sentiment analysis (not overblown generalized error-prone Gen-AI) will also help.

But that’s just the beginning. Technology indicates possibilities, maybe even probabilities, but not guarantees. For that, you will need a human based assessment of the situation. And possibly an anthropological one. If you want to get ahead, you will need to think ahead of the crowd.