Category Archives: Market Intelligence

Another Prediction LOLCat Can Get Behind

We all know what LOLCat thinks of futurists and their ideas. (Just see this post.)

But every now and again, someone comes along with an insightful, and true, prediction that LOLCat can get behind.

Earlier this year, LOLCat discovered an amazingly accurate prediction by Peter Smith (of Spend Matters UK) who, as summarized in this post, predicted that all predictions will be wrong.

However, LOLCat recently stumbled upon this great post by Pierre Mitchell who, in LOLCat’s view (and the doctor‘s view), predicted that “2015 Will be the Year of the Chief Buzzword Officer” [Spend Matters].

And it will. If you thought filling up your Buzzword Bingo card was easy last year, just wait and see what this year, the year of Procurement Damnation, brings. (In fact, this will likely be the year that Buzzword-Free Bingo hits the scene. Once your office mates get tired of filling their card before the boss takes his second breath, they will be searching for a game that lasts the entire hot-air filled meeting.)

What do you think LOLCat?

I Win!

The CPO’s Agenda

A CPO has a lot on her mind these days. As per SI’s recent “Future Trends” expose series, the reason that so many ancient trends are being recycled as future trends is because so many issues are still current for Procurement organizations struggling to catch up to the times and become best in class. That’s why we have to continually deal with:

  • Governmental Regulations
  • Globalization
  • Increased Competition
  • Margin Pressure
  • Outsourcing
  • Risk
  • Collaboration
  • Demand Planning
  • Governance
  • Systems
  • System Integration
  • Process Convergence
  • Raw Material Scarcity
  • Strategic Focus
  • Talent
  • Supplier Relationships
  • Product Life Cycles
  • The Cloud
  • Sustainability
  • KPIs

and a dozen more issues that should have been put to rest a decade ago. But which of these issues are the most important issues and which issues are being overlooked by a CPO who is being blindsided by false issues? And which issues are top on the list?

Fortunately for you, this is a question you don’t need to ask anymore. On the new Spend Matters Chief Procurement Officer site, the doctor of Sourcing Innovation and Pierre Mitchell, of Hackett Group and AMR fame, have collaborated on a 20-part series on the “The CPO’s Agenda”, which is overviewed in the preamble post on “What is Top of Mind for CPOs”, that will tell you, as a new or aspiring CPO, what you need to focus on.

And stay tuned to this new, first of its kind site which, for at least the next six months, will be bringing you a cross-blog collaboration between the doctor of Sourcing Innovation and Pierre Mitchell of the Spend Matters Group (with occasional contributions from Thomas Kase and Jason Busch). The new Spend Matters Chief Procurement Officer site is the first of its kind and the education that is coming your way will be unequalled! This is only the first of three in-depth series between the doctor and Pierre Mitchell that are almost ready to roll, with more in the works. Stay tuned!

Technological Damnation #77 e-Currency

We started out our series with the Economic Damnation of Currency Strength, which, thanks to the recent unexpected fluctuations in certain global currencies, probably has you shaking in your boots. But if you think trying to manage real currency exchange is bad, just wait until you have to start using non-country based e-Currency, like Bitcoin.

Bitcoin, a peer-to-peer payment system released as open source software in 2009, allows users to transact without using an intermediary using a decentralized virtual currency (or crypto currency) which has a value defined by the global market based on the fact that it’s limited and once all of it has been “mined”, there are no more units. Because of its structure, new units cannot be issued on a whim (whereas a country can print as much money as it wants, at the risk of hyperinflation), and, as a result, it’s value can, and has, skyrocket(ed) over night.

For example, up until late 2013, Bitcoin’s value was negligible, at which point it skyrocketed to a value of over one hundred. It stayed there for almost a year until early 2014 when it skyrocketed up to a value of almost 1200, before, over the last year, crashing back down to about 200 (in US dollars). On January 18, 2013 it’s value was 15.70. On April 9, 2013 it was $230. On April 16, 2013 it was 68.36. On May 4, 2013 it stabilized around 112.90. It stayed there until around October 15 when it began to skyrocket to 1,147.25 on December 4, 2013 then it crashed back to 522.23 on December 18, 2013 returned to 940.10 on January 5, 2014 and since then has been on a downward fall until January 18, 2015 when it was 199.56.

As virtual / crypto currency is still in its infancy, shocks like this can be expected and can be much more devastating than the recent drop in the Ruble. And, even worse, now that many vendors are starting to accept crypto currency as payment from global consumers that trust the currency, they will be expecting to pay with the currency as well. And your organization will have to hedge against new crypto currencies, which might also include Litecoin and Darkcoin (as well as a dozen others), as well as existing currencies. The fun is just beginning.

Do You Know the Difference Between Direct and Indirect?

Direct materials are typically classified as raw materials, standard or specialized parts, and sub-assemblies required to manufacture a product. As a result, direct goods and services are typically classified as those goods and services that are strategically important to the organization. For example, for a CPG it is the goods it sells, for a Pharmaceutical it is the chemicals and biological materials it uses for research and drug production, and for a Bank it is the systems and market intelligence feeds it uses to run.

Indirect goods are those goods and services that are not strategically important to the organization. For example, for a CPG it is back office systems, for a Pharmaceutical it is office suppliers, and a and for a Bank it is office supplies.

However, these back office systems for the CPG are strategic for a software and services reseller. Office supplies are strategic for the office supplies vendor and janitorial services are strategic for the janitorial services provider.

But it’s not just the type of organization that determines whether a good is direct or indirect, it’s the organization’s place in the supply chain. What’s direct at one level is indirect at the next. And knowing where you are in the chain not only lets you know how to approach the category but how your supplier approaches the category. And, more importantly, where in the chain the most savings can be obtained.

Societal Damnation #38: The Sharing Economy

Sharing is a good thing? Right? Isn’t that what we’re all taught when we are young?

Well, yes, unless you are the one who isn’t being shared with, or the one who refuses to share. And if you are the one who refuses to share, you may find that not only are you without partners, but without means as well.

As covered in our recent series on the “Future” of Procurement in our first Shiny New Shoes post, The Sharing Economy is one of the few true future trends of the space. And while it’s a breath of fresh air to one who is constantly inundated with futurist drivel, to the average Procurement Professional that is still trying to come to turns with the foundational values of strategic sourcing and the collaboration it requires with core suppliers, it’s downright scary. So scary, in fact, that it can be considered the next in a wave of plagues to descend upon an average Procurement department, still struggling to replace the fax machine with a web-enabled e-Sourcing Solution.

While this sharing economy is currently in the domain of individuals like you and I, and a handful of small businesses who have latched on, this share economy is going to migrate to medium sized businesses en-masse and, when properly utilized, give these businesses access to the latest and greatest technology and economies of scale that these medium-sized businesses will be unable to acquire on their own. Can’t afford to buy that new automation and production system that increases throughput, improves quality, and decreases natural resource consumption? No problem. Form a cooperative with quasi-competitors, build a new factory with the new production technology, and effectively time-share it (for the operating cost). This will put medium-sized businesses on the same playing field as large enterprises and level the playing field in ways that have not yet been thought of. The hippies succeeded and their ideas changed the world — 50 years later.

But it might not be a world your organization gets to conduct business in if it cannot accept, embrace, and form the new reality to its advantage. How will it do this? It will start by identifying opportunities that it cannot achieve on its own. Then it will have to identify what partners it would need to bring those opportunities within its grasp. Finally, it will need to put together a plan to unite those partners and execute it to completion.

This may sound easy, but adopting the necessary mindset, convincing others inside and outside of the company, and then working together across organizations as a team while each member collectively fights on behalf of their respective organization for what they perceive their share of the market to be will not be easy. It will be challenging, but the persistent will prevail. It’s just one labour. Hercules had twelve.