Category Archives: Market Intelligence

Sadly, It Looks Like the doctor’s 2014 Procurement Prediction is Going to Come True!

In Prediction Time Again? Ugh. (Part I and Part II), the doctor predicted that 2014 will be 2013 part II and 2009 part VI. Specifically, this means that

  • the focus will continue to be on cost-cutting and not value-creation,
  • valuable, high-ROI, technology will continue to be ignored, and
  • the training and new talent budgets will remain empty.

According to Deloitte’s recently released Global CPO Survey, 79% of CPO priorities have cost reduction as their #1 priority.

According to the Hackett Group’s recent EPM Executive Perspective on Technology Enablement: A Critical Piece of the Performance Management Puzzle, 63% of world class and 82% of peer group organizations still create management reports using spreadsheets as the primary business application.

And ProcureCon’s just-released “State of Indirect Procurement Benchmark Report”, which was complied from the responses to a benchmarking questionnaire distributed to ProcureCon Indirect West’s audience of procurement and sourcing practitioners, found that 55% of attendees at the event felt that their Procurement team was not adequately staffed and 60% of their organizations had no plans to increase the team size.

It’s a dismal state of affairs indeed.

If you need ideas to help kickstart your Supply Management organization and get out of this quagmire, consider joining the doctor at the inaugural ProcureCon Canada event (and register with code PCA14SI). Let’s share ideas, knowledge, and a commitment to moving the discipline forward, even if we need to light a few fires.

Top 12 Challenges Facing India in the Decades Ahead – 08 – Poverty

As per our last post, India is poor. Really poor. By far the poorest of the BRICs with 2/3rds of the population poor by any reasonable definition of poverty. Just how poor is India? In just about any ranking that matters, it’s not well off. When it is compared to the 16 countries outside of sub-saharan Africa that are poorer than it, India is in the lower half of the rankings at best, and near, or at, the bottom in a few cases.

For example, let’s start with some of the leading social indicators (Source: An Uncertain Glory, p 49):

  • Life Expectancy at Birth: 9th
  • Infant and Under-5 Mortality Rates: 10th
  • Access to Improved Sanitation: 13th
  • Mean Years of Schooling: 11th
  • Literacy Rate: 9th for Males, 11th for Females
  • Proportion of Children Under 5 Undernourished: 15th

And this list includes Afghanistan, Bangladesh, Burma, Cambodia, Haiti, Krygyzstan, Laos, Moldova, Nepal, Pakistan, Papua, New Guinea, Tajikistan, Uzbekistan, Vietnam, and Yemen!

Consider the sanitation metric in particular. In Bangladesh, which is considerably poorer than India, only 8.4% of the households practice open defecation. However, in India, 55% of households practice open defecation. How can you become a first world country if you can’t even provide your citizens with toilets? (Or even outhouses?)

The metrics are even worse when you compare it to the BRICs. Worst life expectancy. Worst mortality rates. Least access to sanitation. Worst literacy rates. Most undernourishment. In addition, it has the lowest immunization rates and the lowest health care expenditures as a percentage of GDP.

With respect to health care, India did launch the National Rural Health Mission in 2005-2006, but allocated it a measly RS 10,000 crores per year for the fist five years. Given that almost 70% of India’s population is still rural, if two-thirds are poor and likely in need of the program, that’s about 560 Million people who could use help from the program. If you do the math, that’s less than 1 rupee per five people! Plus, it seems to be going down a road of privatization, relying on private institutions and private insurance, with public transfers for the poor who make the BPL (Below Poverty Line) cutoff and qualify, and this is a direction that has yet to work successfully for any major country. In almost every country with good health care, a good public system preceded a good private system.

SI could go on, but you get the point. While India is increasing its GDP at a relatively rapid rate, it is still poor (and the poorest of the BRICs) and the average person is really poor and needs a lot of social assistance to even reach the same standard of life that poor people have in China, Brazil, and Russia. With about 800 Billion people who could use some form of government assistance, this is a huge burden in a country that collects, on average, 1 US dollar for every 3 citizens in tax revenue.

The (Board) Gamer’s Guide to Supply Management Part VII: Upon a Salty Ocean

SI is almost radiating rainbows now that it’s resurrected it’s one-of-a-kind blog series that will help you take your Supply Management career to the next level by giving you new and interesting ways to hone your supply management skills. Still more fun than reading about the latest study on the daily migration patterns of the three-toed sloth, but now that you can hone your skills while challenging your peers, it’s three blasts and a half.


It’s 1515, and you are a merchant of Rouen. You invest in ships and city buildings in an effort to not only get rich, but be the richest when Francis I comes to visit the city in an effort to win his favour. The city’s wealth is dependent on fishing and the trading of salted fish, herring and cod in particular. Every week, ships full of salt barrels leave Rouen for the fishing grounds of the Atlantic Ocean and, upon their return, sell their fish in the market.

Upon a Salty Ocean is a turn-based work-placement game that consists of 5 turns, where each turn consists of 3 phases: an event phase, an action phase, and a turn end phase. The event phase determines weather and market conditions which affect fishing and the cost of fish and salt. In the action phase, a player chooses to either take a city action (in which she can buy salt or buildings), a navigation action (in which she can take her ships to the open sea and fish or return to Rouen), a harbour action (in which she can move goods to or from her storage depot or build a ship), and a market action (in which she can buy to or sell from the market).

Sounds simple enough, right?

It would be except for the fact that:

  • the event that happens at the start of the phase can bring stormy seas, which will decrease the amount of fish that can be caught; pirates, which will damage the ships and decrease the amount of fish that can be held; market dips, which will lower the selling price of fish and/or salt; and/or market surges, which will increase the selling price of fish and/or salt
  • actions in the action phase are consecutive, each player can only take one action at a time, and every time an action is taken, it gets more costly for the next player — and all purchases and sales affect the market price
  • you begin the game with a small amount of money, have a limited credit line, and interest charges rack up quickly if you go into debt
  • if you prosper, you must invest in a bank to safeguard your money, or you will lose some of it at the end of the turn
  • each building investment provides different advantages
  • a strategy only works if there is limited competition in that strategy, or
    you luck into the right timing

Just like in the real world,

  • shipping is subject to stormy seas, pirates, and other calamities
  • no one can take two actions at the same time in the real world, w.r.t. the markets in particular, and every action taken increases or decreases the cost for everyone else
  • your resources are always limited, debt is costly, and too little cash flow can bankrupt you (and prevent you from taking any more actions for at least one turn)
  • the more you have, the bigger the target you become for thieves and the more you have to invest in security
  • different capabilities in Supply Management give you different advantages, some tactical, some strategic, some innovative, etc.
  • not everyone can corner a commodities market, a CPG segment, etc.

It’s a real supply management market conundrum. Do you try to conquer the seas and get the most fish? Conquer the market, buy low, sell high, and make your riches off of trade? Or do you acquire the most buildings and make money off ship building, banking, and building the church? Played properly, all strategies can win, including the fishing-free market strategy. Played wrong, and bankrupt you will go. Just like the real world.

Supply Management Has a Long Way To Go To Get to The Top!

The ISM and BravoSolution (who want to align Sourcing with the rest of the organization) recently released the 2013 ISM Survey of Procurement Executives on “Procurement & Sourcing: Moving from Tactical to Strategic” which summarized the responses from 545 Supply Management executives at the Director level and above to a detailed survey created by BravoSolution and administered by ISM last July and August.

These executives were given a list of 24 topics identified to be of recent concern to procurement and sourcing executives and asked to identify their top organizational priorities in 2013. The top priority of improving cost reduction and savings should not be a surprise to anyone since most companies have been laser-focussed on cost-reduction and savings since the major financial crisis in 2007-2008, to the detriment of just about every other important goal. However, what should be surprising is that cost reduction and savings is not only the top priority in 60% of companies but still twice as important as the second most common business priority of revenue growth and profit improvements despite the fact that most organizations expect their cost reduction efforts to yield less than 10%!

The time of near-zero inflation is at an end and with hyper-inflation a strong possibility in many commodity markets and a few countries, and, despite the opinion of some experts, we could be looking at a return of stagflation in some global economies. And even if we don’t see stagflation, the rapid rise in costs across a number of raw material and commodity categories should be enough to convince the average Supply Management professional that savings will not be possible in many categories and the best one can hope for is cost avoidance — unless other opportunities for savings are identified. Opportunities that revolve around process improvement, raw material substitution, value-add, and non-value add service removal. This means that more effort should be spent on supplier collaboration and innovation, supplier performance and sustainability management, and raw materials, but the first two of these options were only listed as priorities by 19% and 23% of the respondents, respectively, and the third option didn’t even make the list of the 9 topics that were selected by more than 10% of respondents.

It was nice to see that 30% of respondents recognized that a key capability of properly performed Procurement is the delivery of revenue growth and profit improvement, but this doesn’t happen without the proper focus on efforts that can lead to revenue growth and profit improvement, which include efforts like the Procurement Perfect Order (which will make your organization a more attractive supplier), improvement of working capital (which will allow Finance to reduce interest and penalty payments, take advantage of early payment discounts, and possibly even earn money on short term investments), improving customer loyalty (as it costs less to keep a customer than to acquire a new one), improving the strategic nature of trading partner relationships (as this can lead to joint efforts to take cost out of products and services and increase sales), and more spend under management (which permits better spend and opportunity analysis). However, from this set up of options, only two — getting more spend under management and improving working capital — were selected as priorities by more than 10% of respondents. Without appropriate priorities, profit and revenue goals are just pipe dreams.

There’s a fair amount of analysis in the 23 page report, but the bottom line is that Supply Management has a long way to go to become the strategic powerhouse it should be. It’s just like Angus, Malcolm, and Bon said back in 1975 — It’s a Long Way To the Top (If You Wanna Rock ‘n’ Roll). A long, long way …

If You Really Want to Make Stakeholders Hate You, Just …

Spend Matters UK recently published a 5-part series on how to make stakeholders hate you, which presented five actions you can take that, despite your intentions, will help you achieve your goal of helping stakeholders to hate you.

In order, they were:

  1. Drive them Mad with Technology
  2. Revel in Being the Gatekeeper
  3. Talk Your Own Language
  4. Insist Every Spend Category is the Same
  5. Focus Purely on Savings

From a Procurement point of view, pushing for new technology, focussing on savings, and speaking the language of good Procurement is typically a good thing (as technology helps you do your job better, savings pleases the C-suite, and the language of Procurement isn’t appreciated enough). But from a Legal point of view, technology is irrelevant; from a Marketing point of view, it’s about sales, not savings; and from an Engineering point of view, the language of Procurement is irrelevant — the product has to work, work well, and be something to be proud of (damn it). So, even if it’s delivered with the best of intentions, a push for new technology, a focus on savings, or explanations delivered in your language can turn stakeholders off.

However, insisting every category is the same or revelling in your role as the gatekeeper is definitely confrontational and will help achieve your goal of getting stakeholders to hate you, with time and effort of course. But if you really want your stakeholders to hate you, and hate you with an unrelenting passion, the best way to accomplish this, beyond a shadow of a doubt, is to:

     0.  Take all the Credit

Assuming that you can convince the stakeholders (or the C-Suite who will force them) to work with you, the best way to truly become the target of their ire is, once the project is a success, take all the credit. While it’s true that the root of the project success — be it cost savings, quality improvements, JIT delivery, value-add, etc. — will be the result of the technology, process, and supply management experience you bring to the table (which takes the good job they were doing and makes it great), you can’t take all the credit. Remember, (as far as the stakeholders are concerned), they worked just as hard as you; they brought the category expertise to the table; they have the experience with their preferred suppliers to, supposedly, determine which tactics and methodologies are likely to yield the most fruit, and they have a need to look good to the C-suite too. (Especially if their department is seen as a cost-center and not a value-creator.)

So if you stand up when the project is done, compare the greatly improved results that were achieved when the department worked with you for the first time (compared to the dismal results the department achieved on its own last year), and do your absolute best to take all the credit, the stakeholders will hate you so much that they will strive to open the gates of hell and unleash its fury upon you. It’s the only thing you have to do to gain their eternal animosity. No ifs, ands, or buts about it. No top five list needed.