Category Archives: Market Intelligence

Five Years Ago We Told You to Blame the Bankers …

… for the biggest risks in your supply chain, as per our classic post where we told you don’t blame the lawyers, blame the bankers because they were ultimately responsible for three of the top four most likely risks to disrupt your supply chain.

(Even though the doctor can sympathize with William Shakespeare when he said the first thing we do, let’s kill all the lawyers, the lawyers are not responsible for the current state of the global economy, the bankers are. And while it’s true that the lawyers are not innocent, happily taking the bankers money to do things that disrupt entire economies, it is the bankers that were the ringleaders here.)

But do we still blame all the bankers? Well, yes, we blame them for the economic risks that continue to persist to this day. But we no longer blame them for the top three risks in our global supply chains.

That honour goes to … The United States of America. Yes, that’s right. The root cause of the three biggest risks in your supply chain is the United States of America. (And not China, although there is a massive risk there as well. And if we wait a few more years, they might get their turn on top.)

How can it be? How can the United States be the single cause of the three biggest risks in your supply chain?

To explain that, we’ll start by repeating them for those of you that have not read The Global Risks Report 2019, 14th Edition, from the World Economic Forum.

According to this report, produced in partnership with Marsh & McLennan Companies and Zurich Insurance Group, the three biggest risks are:

  1. Extreme Weather Events
  2. Failure of Climate Change Mitigation and Adaptation
  3. Natural Disasters

and, as should be obvious, these are all interconnected.

Many (if not the majority of) natural disasters are the result of extreme weather events, and many (if not the majority of) extreme weather events are, whether your choose to believe facts or not, the result of the failure of climate change mitigation and adaptation.

And why has climate change mitigation and adaptation failed? Because it hasn’t happened. And why hasn’t it happened? Because countries aren’t aggressively working toward it. And why is that not the case? Because only 175 parties, of 197, have ratified The Paris Agreement (the UN Convention on Climate Change) … and one party that initially accepted has withdrawn (and done so in a very public manner). Guess what that country is? You guessed it!

The United States of America has withdrawn from the Paris Agreement. If the country that is responsible for approximately 25% of global GDP refuses to support the most important initiative in the world (which still falls short of where we need to be to truly mitigate climate change, but would make a substantial impact on slowing climate change down), especially when it comes to preventing the three biggest risks in your supply chain, then that country is unilaterally responsible for those risks.

So next time a typhoon sinks the freighter carrying all your goods, don’t blame God, Poseidon, or Mother Earth. Blame the United States of America. Or, if you really want to, blame Trump. But don’t blame God or nature because, with the current rate of increase in the number of natural disasters annually, there will soon be a 90% chance that it the natural disaster is 100% the result of climate change brought on by the United States inaction to do anything about it.

The Value of Market Intelligence in a Down Economy

A decade ago we ran a piece on The Value of Market Intelligence in a Down Economy because it was a down economy near the end of last decade and many organizations were overlooking the importance of market intelligence at a time when it was needed most. (Because, when times get tough, organizations always cut the training budget first and the intelligence / consulting budget second, even though the only thing that will get the organizations though the tough times is their talent — which needs to be as educated and informed as possible to do the jobs that need to be done.)

But now that depression era economics are about to make a come back, SI believes its time to repeat the message in the hopes that you will do the right thing and make sure that, under no condition, do the limited market intelligence and training budget get cut when they are needed most.

Remembering that success in a down economy stems from smart sourcing, and that smart sourcing stems from intelligence, it should be pretty obvious how critical market intelligence is, but just in case it is not, let’s remind you that:

  • market cost data is market intelligence
    and without it, you don’t have enough data to know how much you should be paying (even if you have extensive should cost models because, guess what, those component costs need to come from the market)
  • expected supplier performance is market intelligence
    even if you have lots of historical performance data across your supply base, that doesn’t tell you how good a supplier should perform, just what would be better performance for your organization
  • expected product quality, lifespan, and consumer usage levels is market intelligence
    and you are only going to get so much data from your customer base, and none for a new product line under development

Plus, when you look at the big picture:

  • it’s not as expensive as you think it is
    since a lot of the data or information you need to spot trends and focus on the core issues and data points is low cost, and even expert advice at 5K a day is nothing if it saves you 50K of internal research or steers you toward a solution that helps the organization generate a 500K return
  • it enables supplier performance, and relationship, management
    which is key in difficult times — just look at the auto industry. When times get tough, the American automakers (that score dismal on the OEM-Supplier Working Relations Index [OEM-WRI]) all fail while the Japanese (and Korean), who cooperate and collaborate with their suppliers (and rock the OEM-WRI) always pull through
  • intelligence gathering is an iterative process
    not “one-and-done” and if you stop, especially when market conditions are changing constantly and could change drastically at some point in the near future, you can be blindsided by an event that could grind the entire organization to a halt

Market Intelligence is critical for good decision making – in good times, and bad. Especially in bad. It identifies risks before they materialize and insures that your contracts have appropriate risk mitigation clauses built in. It leads to savings and cost avoidance that would never be identified without it. And while it doesn’t always require multiple high six-figure subscriptions to analyst firms … it does require some spending to keep up with what you need, when you need it. But if you choose wisely, it will save you 5X to 10X what you spend or help you increase your value proposition by that amount.

So get the intelligence you need. Today.

We’re Still Stuck in 2009 … Why?

Five years ago, the doctor wrote a post about how the doctor’s 2014 Procurement Prediction is Going to Come True and that 2014 was going to be 2009 Part VI and

  • 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.

And it was a sad state of affairs. And he’d hoped that, by now, things would have changed. But if you check the latest “Deloitte Global CPO Survey”, 78% of CPOS are still PRIMARILY FOCUSSED on Cost Reduction!

Unless they’re Procurement team has been totally incompetent for the last five year, that’s not going to happen. We’re about to return to Depression Era Economics. We’re heading for a downturn a result of a global slowdown in GDP growth. China can’t keep building empty cities. The US can’t continue to build (defence) debt and grow without an immigrant workforce that will do the jobs Americans don’t want. Goods can’t continue to get cheaper when labour costs are rising and materials are becoming scarce. Outsourcing is not going to get cheaper when transportation costs have to rise as energy (oil) costs rise. And so on.

Also, the study found that, even in 2018, only one third of Procurement Leaders use modern technologies such as predictive analytics and collaboration networks.

And over half of Procurement Leaders believe that their current teams do not have sufficient levels of skills and capabilities to deliver on their procurement strategy … proving that they have, as expected, not been investing in training like they should have been.

Eleven years ago, Hackett published a vision of Procurement in 2020 where it predicted that, through a year-over-year evolutionary strategy, it would reach the point where it was harnessing the power of supply markets to maximize the value it is getting from its spend, enabling business strategy, and optimizing its tactical execution. But, in an average organization, Procurement is, at least for now, still overspending, still divorced from business strategy, and unable to react to unexpected disruptions or opportunities in the supply chain.

And it looks like 2020 is, not as everyone predicted in the noughts, going to be 2009 Part XI. Who will take the lead and change it?

Still No Love for the Oompa Loompas this Valentine’s Day

It seems the days of the oompa loompas are long past … as they have been on hard times for over a decade now. Not much has changed in the last ten years. They got no love then, they get no love now.

Just look at some of the headlines from the past year:

  • Feb 9, 2019 Child Slave Labor Rampant in Chocolate Supply Chain
    Sixty percent or more of the world’s cocoa is produced in the Ivory Coast and Ghana in West Africa. These countries are notorious for the worst forms of child slavery. An estimated 1.9 million children are engaged in forced labor on the Ivory Coast alone.
  • Jan 21, 2019
    Do you want slavery with that chocolate?
    Most chocolate has been through two separate supply chains before you buy it. The second chain is where a confectioner … buys bulk finished chocolate or chocolate components from one of the huge global companies that make these.
    The first chain is where these huge global companies buy cacao from farmers and make it into finished chocolate and components (cocoa powder, chocolate liquor, cocoa butter, etc.). It’s mainly the market in this first chain where the problem lies. Almost all of the sellers of cacao are little more than subsistence operations … the buyers can set the price. This extremely uneven market and other capitalist pressures have created a situation where the world has a huge demand for cacao, and yet the farmers who produce it cannot possibly pay     (or earn) a fair wage at the prices …
  • Jan 9, 2019 Chocolates, caramels might be contaminated with hepatitis A, FDA warns
    Candy sold by a Kentucky company and QVC is being voluntarily recalled for fear that it might be contaminated with hepatitis A, according to a U.S. Food and Drug recall notice.
  • Nov 30, 2018 Global chocolate supply chain tainted by abuses in Brazil
    The global chocolate supply chain is tainted by the use of cocoa from Brazilian farms where human rights violations are common, a report released Friday said. Among the abuses detailed are farmers forced to work off debts to landowners or in degrading conditions, as well as thousands of instances of child labor.
  • Nov 06, 2018 Taiwan finds pesticide in organic chocolate from France (Taiwan News)
    Taiwan stopped a batch of organic chocolate from France at the border because it contained an excessive level of the pesticide Piperonyl butoxide. The substance was listed as a low-to-medium-level toxic material, likely to raise the possibility of liver cancer in animals.
  • Feb 15, 2018 Cadbury Caramilk chocolate comeback tainted by product recall
    A “limited number” of Cadbury Caramilk chocolate blocks have been recalled just two weeks after the retro treat made a popular comeback to Australian stores earlier this month. All Caramilk 190-gram blocks … have been recalled due to a number of products found to contain small pieces of plastic.

The continued plight of the oompa loompas is very unfortunate considering that many studies have found that (dark) chocolate is good for you. Now, ten years ago we said you should be rewarding the oompa loompas for their hard work, but considering that even if they are working hard and not using slave (child) labour or tainted chocolate, we can’t be sure that the producers they are buying the raw cocoa from are even remotely ethical.

They still deserve a a little love, but they also deserve some new job opportunities. They work hard, and it’s not their fault everyone else is less ethical than them.

Where’s the Beef Coming From?

As with last year’s post with the same name, this isn’t about the beef supply chain, or the purity of the beef that you source, but yet another post about the pitch. We’re latching onto Wendy’s classic catch-phrase because it’s easy to remember and one that you should never, ever forget! Especially when you are being sold something that sounds better than it is, or what you are being sold is better than what you expect from the organization providing it.

Why must we talk about this again and again? Because it’s too easy to get suckered into a deal that is too good to be true or without substance. It doesn’t matter how big and fluffy that sesame seed bun is, how fresh that lettuce is, or how juicy that tomato is if there is no hamburger patty or the hamburger patty is mostly seaweed.

As proof of how easy to get suckered in to something that sounds better than it is, we point to the news (no, not the fake news) and the new round of coverage of the Fyre Festival fiasco as a result of recent documentaries which highlighted how hopeful attendees promised luxury meals, lavish accommodations, and the music festival of a lifetime got pre-packaged sandwiches, FEMA rescue tents, and the sound of the sea.

But it’s not just crooked festival promoters you have to look out for. It’s also sales reps who will send you their top-of-the-line product as the “demo” from their brand new factory when you actually get the bottom-of-the-line knock-off produced in their most outdated factory which has a 50/50 chance of short-circuiting when you flip the power switch. Or consultancies that trot their junior partners and senior talent in during the dog-and-pony sales show for your big platform implementation / customization project but then switch them out for recent college grads with no experience in your industry when you sign on the dotted line (as the junior partners were just the “project advisors” who don’t actually do any of the work). Or domain experts who scrape content from industry expert sources (like Sourcing Innovation and Spend Matters), repackage it, and pretend it’s their own and sell you niche advisory sourcing or I2P management services they actually know nothing about.

In other words, it’s very important to not only ask “where’s the beef?” and get to the core requirements of your sourcing and procurement project, but also where is it coming from because, otherwise, you don’t know if you’re getting Grade A Calgary Steak, Yield 5 Utility Beef from Mongolia, or Eastern European Horse Meat. And only one of these will ever be accepted by your luxury restaurant customers.

So just like reporting should be based on facts, Sourcing should be based on facts. Who is providing the product or service, from where, when, how, what production measures are being used and what quality measures are in place, and why, from an objective viewpoint, is it better. Otherwise, you could get sucked in by the fancy demo, the unrealistically low price point, the bundled services, or something else that is actually without value to your supply chain and customer and end up spending more money in the end on warranty costs, transportation costs, auxiliary support costs, and so on.