Category Archives: Procurement Damnation

Influential Damnation 95: Competitors

Conferences are annoying, Consortiums are frustrating, but Competitors are outright damning as they are there, in your face, day in and day out. Your company makes an announcement. They try to one up the announcement. Your sales team gets in front of a customer. They weasel their way in. Your engineers get a great idea. They try to steal it. Your scientists make a big breakthrough. Here comes the corporate espionage! And so on.

But that’s just the tip of the iceberg. Procurement has its own set of problems to deal with. These include:

They compete for limited supply and drive prices up.

Markets are all about supply and demand. Sometimes supply is based on demand, as more demand leads to more supply, but sometimes supply is based on raw maw material availability. Raw materials are often in limited supply due to the amount that can be mined, harvested, or processed. And if your competitors need these raw materials as badly as you, and there is not enough to around, either your prices are going up or you’re the organization not getting your demand met.

They compete for limited talent and drive prices up.

Procurement professionals need to be jack-of-all-trades and masters-of-one. These individuals are very few and far between and your competitors will want them just as bad as you. So, not only will you have to vie for their attention, but you will have to offer the salary, training, international experience, socially responsible, and very attractive opportunities the best candidates are looking for, and one way or another, that’s going to cost you top dollar.

They compete for limited expert (technology) resource time.

Let’s face it. You’re never going to be able to find and hire enough talent in-house to tackle all of your Procurement project needs, which will include complex sourcing, strategic procurement, non-complex/non-strategic sourcing, contract (lifecycle) management, supplier (relationship) management, performance analytics, technology implementation, and data feed integration, and you will need third parties to assist you. However, due to ever increasing requirements for supply management success, and the ever increasing sophistication of platforms and processes needed to manage your constantly evolving global supply chains, you will not only need the best vendor partners, but the best talent at those partners, which is a relatively small percentage of the overall workforce. Your competitors will be vying for this talent too, and some will be making bigger (and in the eyes of the vendor) better offers for the time of these expert resources, which could leave you up the creek without a paddle.

While your organization might need competitors to justify its market, when it comes to Procurement, sometimes that’s the last thing the organization needs. That’s why Competitors are another perpetual damnation.

Authoritative Damnation 65: Solution Partners

Activist Investors and a troublesome Board of Directors are one kind of damnation, but solution partners are another. Generally speaking, an activist investor and a board of directors are only troublesome on a quarterly basis, but solution partners can be troublesome on a daily basis. How so?

You depend on solution partners to serve your customers.

Some customers want your products, but other customers want your products and support services that your organization does not offer. As a result, you will need the help of solution partners, which will likely own the customer relationship. As a result, you are totally dependent on these solution partners to not only serve your customers’ needs but make your customers happy. And if they own critical customer accounts and they say dance, you have two choices, dance or lose critical customer accounts. Not a great position to be in.

You depend on solution partners to run your organization.

You need them for your custom manufactured products, your enterprise software systems, your MRO, and sometimes even for your internal IT and change management projects. The bigger you are, and the more focussed you are, the more you need these solution partners. It’s not a bad thing if you have good relationships, but if the relationships go south, but you are still under contractual commitment for a year or more, it can be a daily damnation until the relationship ends and gets transitioned to a new supplier.

You depend on solution partners for innovation.

If your organization’s strength is marketing and consumer demand forecasting, and it depends on solution partners to come up with new custom product designs to meet those demands, and on solution partners to come up with new manufacturing techniques to implement those designs, then the organization is completely dependent upon solution partners for innovation. This means that it is not only unable to thrive, but also unable to survive, without a strong solution partner ecosystem. It doesn’t matter how big it is or how rich it is, but just on how good it is at managing those relationships. If the organization is not good at SRM (Supplier Relationship Management), it, like Procurement, is doomed, marooned, and about to be entombed.

In other words, while solution partners can be an organization’s saving grace, they can also be a source of eternal damnation, driving you down the highway to hell.

101 Procurement Damnations – We’re Almost There!

Our upcoming post chronicles our 80th Procurement Damnation that you, as a Procurement professional, have to deal with on a regular, if not daily, basis. That’s a very large number of damnations and we’re still not done! As per our halfway post, the damnations we’ve chronicled to date aren’t the only pervasive damnations that get in your way and pester you on a daily basis! We still have 21 damnations to go!

However, before we start the final stretch, we thought it would be a good idea to summarize the list to date so that you could go back and review any posts in the series that you might have missed during your hectic conference season as this is SI’s biggest and most aggressive series to date, much longer than both the 15-part “Future” of Procurement series and the 33-part “Future” Trends Expose series (that followed) combined and double the length of the maverick‘s 50 Shades of Pay series (assuming it gets completed) which, to date, only has 14 parts up and available for your reading pleasure.

There’s more that could be said, but as we’ve already said so much and still have so much more to say, without further ado, here are the links to the first 80 for your reviewing pleasure.

Introductory Posts

Economic Damnations

Infrastructure Damnations

Environmental Damnations

Geopolitical Damnations

Regulatory Damnations

Societal Damnations

Organizational Damnations

Authoritative Damnations

Provider Damnations

Consumer Damnations

Technological Damnations

Influential Damnations

Bonus Posts!

Technological Damnation 76: Cybersecurity / Cyberattack

Recently we discussed technological damnation 78: e-Privacy, where we hinted at the difficulty of maintaining privacy in an era where keeping the data encrypted and secure is getting harder by the millisecond. We followed that with a discussion of technological damnation 92: data loss that noted that intrusions are hard to trace and like privacy, loss prevention requires secure, encrypted, digital vaults that, with advances in computer technology, often get less secure by the millisecond, starting the millisecond they are implemented.

But the damnation of cybersecurity goes well beyond (e-)privacy, which consumers are very concerned about and data loss, which your C-suite is concerned about, to fraud, sabotage, and fear.

Fraud

A cyberattack might be perpetuated to steal customers’ data, especially if it has value (because it contains credit card numbers, health records that snake oil charlatans can use to target desperate people, or incriminating information or photos); to steal proprietary data (that a competitor would pay a pretty penny for); or to covertly steal company funds by inserting false supplier records into the e-Payment system (that would allow fake invoices to be automatically approved by the e-Payment or e-Procurement system) or accessing a company’s bank account through the bank integration so that the hacker can ACH the funds to another account controlled by the hacker that will allow the hacker to electronically wire all of the available funds to a bank account in a country where the funds cannot be recovered.

Sabotage

A cyberattack might be perpetuated to take down core systems that run production lines, as modern production lines are software controled and the right malware can physically damage equipment by causing it to overheat or operate beyond safe parameters. Damaging a multi-million production line, taking down a power grid, or contaminating multiple batches of product can shut a company down for weeks and do considerable financial damage to the company in the short term, and reputational damage to the company in the long term as it struggles to recover from an inability to meet its customers needs for a prolonged period of time and keep its operations safe.

Fear

A successful cyberattack can install fear in a company and its upstream and downstream supply chains all the way from the company that mines or produces the raw materials that are consumed by the company to the end consumer that buys the products. Sometimes that’s enough to do significant damage.

Defense

Defending against a cyberattack is nigh impossible. You don’t know when it’s coming. You don’t know where. You don’t know what zero-day vulnerability the hacker is going to try and take advantage of. You don’t know what communication lines the hacker is going to use and what machine they are going to try and route through. Can you encrypt everything? Secure every line? Patch every known security hole on every machine? And insure that not a single employee can be socially engineered to accidentally give a hacker any additional information to help the hacker in her quest? Defense is almost impossible.

As hinted at in our previous damnation posts on e-Privacy and data loss, cyberattack and cybersecurity is a damnation that is becoming more damning by the day.

Technological Damnation 90: Open Source

When it comes to software, proprietary madness (Part I and Part II) is one damnation — but open source, the other side of the coin, is another.

This is another damnation that is probably making you huh?, because it seems that open source, which not only give us free software, but some of the best software out there, should be a great thing, and it is, but from a Procurement point of view, it’s a damnation. Why?

How do you cost it?

There’s no such thing as a free lunch, and where open source is concerned, this is a free lunch at the Bawabet Dimashq Restaurant where you have to wash the dishes — for the entire floor (that contains 6,014 seats) all by yourself! Unlike most proprietary software which comes with a warranty, a maintenance plan, and support, open source simply comes with a license that says you have to right to use it if you see fit, but you waive all warranties and liabilities while doing so. If it is broken, you can ask the community for help fixing it, but you might have to fix it. You have to maintain and update it. You have to install it. And in some cases, you have to even compile it! That takes development manpower — and sometimes lots of it. Whereas all you might need for vendor provided software is an admin to create and maintain accounts, you might need a dev team backing up the open source.

How do you protect it?

Chances are you will find something that doesn’t quite do what you need, or that needs to be fixed, and will have to fix, and augment it. Under the terms of most open source agreements, any modifications you make must also be open source and released, so if you want to do any custom upgrades, you better be prepared to give them away for free. At least with proprietary technology, you can always negotiate with a provider for custom developed technology exclusive to you.

How do you defend your investment against it?

Maybe the best choice today is that proprietary enterprise software license that costs you high six or low seven figures for enterprise wide deployment — but which should net you a nice return based upon the value you expect to get from it under the assumption that the vendor’s promises will materialize. However, you will only get the advantage you expect in the market if your competitor cannot get a solution for any less. What if an open source with equivalent, or better, capability hits the market next year and the only cost is the cost of training or a few consultants to implement it plus an ongoing system admin after that? If your competition can get equivalent software for a fraction of the cost in a year, will you net your return? And will you be giving up a greater return by locking into proprietary software now when the open source that could materialize in the near future might even allow your organization to take an accelerated path to savings?

Just like proprietary madness, open source is also a technology damnation. When it comes to technology, it’s damned if you do and damned if you don’t.