Category Archives: Procurement Damnation

Influential Damnation 98: Pundits / Futurists

Pundits and Futurists, who are one in the same, are the third influential damnation we are discussing, having already addressed consortiums and conferences. In order to see how these individuals are one in the same, we’ll start by reviewing standard definitions.

A pundit is defined as a person who offers to mass media their opinion or commentary on a particular subject area on which they appear to be knowledgeable.

A futurist is defined as a person who regularly makes predictions about the future, which is precisely what a pundit typically does when they offer their opinion and commentary to mass media!

Why are these individuals a damnation?

First of all, as clearly explained in Sourcing Innovation’s recent series on The “Future” of Procurement: What’s Old is Still Old! and An Expose of Procurement “Future” Trends: Digging Deep to Reveal the Truth, most of what those bloody futurists are proclaiming as the grand future of Procurement is old news, ongoing blues, or remanufactured shoes. Most of what they have been preaching from the worn out pulpit the last few years is the exact same message that their futurist predecessor were preaching one or more decades (or even centuries) ago!

Secondly, like the purveyors of apps, mobile, big data, and cloud, most of their messages are based in fear. If you don’t prepare for this today, you will go out of business tomorrow. If you don’t get this platform today, you will be relegated to the third world tomorrow. If you don’t jump on this process today, you will bleed red tomorrow.

Thirdly, when they get tired of preaching their tired old messages, they jump on the first vendor that gets a bad rap in the gossip chain as a result of an implementation that didn’t go perfectly, typically before figuring out why and who is really to blame. While it’s usually the case that the vendor didn’t do as good of a job managing the project as they should have done, it’s often the case that the customer didn’t heed the advice of the vendor and tried to rush ahead or do something themselves that was difficult without getting proper training and guidance. Enterprise technology, and especially enterprise technology that relies on a lot of integrations, data, advanced analytics, or sophisticated models, is always more involved and difficult to implement, integrate, and configure than you think it is and trying to do it yourself without an understanding of the nuances and gotchas is just asking for trouble. And while it is true that some vendors charge a lot for this service, it was the customer’s choice to select that vendor in the first place so the blame typically rests as much on the customer as on the vendor. And a pundit that just jumps all over the vendor without getting a full picture of what went wrong and how it could have been prevented doesn’t help anyone. We need to identify failings, their root causes, and solutions so that everyone can learn and move forward. Not encourage Perez Hiltons’ to invade our space.

Anyway, they’re a damnation and that’s why if the doctor is anything, he’s an anti-futurist.

Technological Damnation 79: Big Data / “Data” Scientists

About the only technological damnations that grind the doctor‘s gears more than “Big Data” are Mobile, Apps, or The Cloud (which may be the worst damnation of them all).

So why is this a damnation? Besides the facts that “big data” is not new and the term “data scientist” is bullish!t? Let’s list a few reasons:

  • it’s unnecessary confusion for the sole purpose of
  • fear marketing and
  • labour cost inflation.

Let’s take each of these one by one.

Big Data is NOT new

We’ve always had more data than we could fit in memory, or even on a hard disk. When the doctor was getting his degrees back in the early 90’s, he was focussing on (multi-dimensional) data structures, algorithms, and computational geometry (which are the fundamental computer science and mathematics theories that underlie databases, analytics, and optimization) and when he was designing structures and algorithms to process this data efficiently and effectively, and studying their ability to scale, he regularly ran into the problem of not having enough memory to fit all of the data in memory that he wanted (to study large scale applications) or not enough disk space to store everything he wanted (and support swap files). Physicists, (GIS) engineers, operations researchers, etc. always had (access to) more data than they could work with at any one time or even fit on a single machine. Nothing has changed. Yes it is true that we can collect data faster than ever with so many devices with microprocessors and onboard memory collecting data every second, but it’s also true that hard drives and memory have scaled. Back in the day, the doctor‘s first PC had a 10 GB hard drive and 1 MB of RAM (and that was a lot). Now, the doctor‘s three-year old mid-end laptop has 8 GB of RAM and a 500 GB hard drive (and the average server has 256 GB, or more, of RAM and a few terabytes of hard drive space).

“Data” Scientist is a bullsh!t term

Pardon my language, but what the hell is a “data” scientist. Don’t you understand that every scientist is a “data” scientist. All scientists collect data, analyze data, interpolate data, make hypotheses on data, and collect more data to test those hypotheses. All scientists do this, no exceptions. Some, such as statisticians or computer scientists, focus more on data analysis and interpretation than others, but they are not a “data” scientist. They are a statistician or a computer scientist.

Unnecessary Confusion

Pretty much everyone who uses “big data” or “data scientist” is using it in such a way as to do their best to confuse you to the point where you feel stupid and ask them for help. Help which will cost a small fortune.

Fear Marketing

Most utilization of the terms is designed to not only confuse you, but instill as much fear as possible because it is designed to make you feel like you don’t understand it, but your competitors do and, moreover, if you don’t figure it out fast, your competitors are going to use their understanding to derive insights that these competitors will then use to steal your customers and your marketshare — so you better pay a big fistful of cash to take a ride on the “big data” bandwagon fast, or risk being stranded on the side of a desert road with no horse, no water, and no map.

Labour Cost Inflation

Because the providers who are driving the “big data” bandwagons are driving unnecessary demand for their analysts (which they are calling “data scientists”) through their confusion-based fear marketing, and rapidly reducing availability of those resources (beyond normal utilization of those resources) when they are successful, they are able to unrealistically inflate prices because of the perceived lack of resource supply. Net effect, you pay more for resources you may not even need!

In short, not only is “big data” an eternal damnation (and one that children of the 80’s would proclaim originated on Eternia), but it is a damnation that will be in your face day-in and day-out until the providers find a new fear-driven bandwagon to thrust upon you.

Technological Damnation 85: Apps

Of all the technological damnations, this is probably one of the most annoying. Procurement is B2B, not B2C, and there is not an app for that. The only app we need in Procurement is an app for getting each and every person who says there’s an app for that diagnosed as mentally insane and committed. Because, when it comes to Enterprise Procurement, there is no app for that!

In order to make this crystal clear, let’s define exactly what an app is:

An app is a piece of software designed to run in a browser or on a mobile deice

So why isn’t this enterprise procurement? Again, let’s start with a definition.

Enterprise Procurement is the act of buying raw materials, components, goods, services, works, or other consumables from an external source to support the needs of the business and its consumers. This act involves a process that starts with (strategic sourcing), moves on to contract negotiation and management, involves supplier performance and relationship management, generates requisitions and purchase orders, that are followed by invoices and goods receipts, matches, payments, and inventory management.

You really think there is an app for that? Really?

Let’s be clear.

  • Approving a requisition is not an enterprise procurement application.
  • Viewing a report is not an enterprise procurement application.
  • Checking the status of a shipment is not an enterprise procurement application.
  • Placing an order is not an enterprise procurement application.
  • And every other tinky-dink feature you can do in a browser is not an enterprise procurement application.

When it comes to enterprise Procurement, there are only platforms. Anything less is a waste of time, money, and bits. But the app bullsh!t is increasing by the day. It’s a damnation. See it for what it is.

Consumer Damnation 74: Demand Planning

Each group of customers are a damnation upon themselves, and they will get the attention they deserve, but demand planning to meet customer demand is its own damnation. Why is this?

Traditional demand planning models require historical data.

To be precise, they require a fair amount of historical sales or usage data in order to be accurate. And sometimes a lot of sales data. But with new product introductions coming fast and furious every day, there are so many categories without a decent amount, if any, historical sales data that it’s hard to make good predictions. Now, one can always use the most similar product, or the product the new product is expected to replace, but this weakens the model and the confidence in the result.

Traditional demand planning models require market predictability.

To be more precise, they expect that the market will not substantially change. That the needs will stay the same. The utilization or replacement curves will stay about the same. That a competitor won’t substantially increase or decrease their market share overnight. That a revolutionary new product won’t be released that causes a huge market shift.

Traditional demand planning models require market foresight.

In addition to requiring historical data and market predictability, traditional demand planning requires market foresight. Knowledge of potential competitor product introductions that could change the market demand. Knowledge of innovations that will begin demand shifts. Knowledge of general market conditions that could delay replacements or result in reduced demand due to cash availability.

Demand Planning requires knowledge of the expected price point.

Most products are services, especially in the end consumer market, are very price dependent. People will pay more if they perceive more value, which could be better quality, more functionality, or owning an iconic brand, but if they don’t perceive more value in your product which is priced higher than a competitor’s product, don’t think for a minute, even if they bought from you last time, they won’t shift. And price prediction is difficult if it is dependent on production cost, which can be variable if transportation can involve unpredictable fuel surcharges, raw material prices can skyrocket due to insufficient supply as a result of a disaster, and labour prices are dependent on contingent labour to meet demands at peak periods.

In other words, sometimes demand prediction models fall flat, and demand projections come from a place that can only be seen by a proctologist with a flashlight, so how do you effectively plan for those as a Procurement Professional? You don’t. It’s damnation.

Provider Damnation 70: Outsourced Providers

Dear outsourced service provider, you didn’t think that Carriers and 3PLs were going to get all the attention did you? You can cause your clients just as many headaches as these providers, if not more. In fact, you can also cause them cold sweats, fever, panic attacks, and even heart attacks if you play your cards right (and very, very, wrong for the client).

Outsourced Serviced Providers, especially those that are experts in what they do, can be a boon to an organization trying to get some quick savings to hit some (overly) aggressive (and stupid) savings targets set by the C-Suite (that doesn’t realize Procurement should be about maximizing value, not maximizing short term savings). This is especially true if the Procurement Service Provider (PSP) outsourced to is a GPO (Group Purchasing Organization) that already has contracts for goods and services in a number of categories required by the organization at rates lower than the organization is paying now, as any categories the organization can switch over result in instant savings. It’s also true if the provider is an invoice and payment processing provider that is fully automated and can accomplish the same task as the organization at half of the price (because 2 workers can do the work of 10 and the platform subscription is only the annual cost of 3 worker’s salaries) and free up valuable resources in the organization to focus on strategic value identification activities and not tactical processing.

But these benefits come at a cost.

Handing over a category means losing control on that category.

GPOs are going to select providers that please the majority of their customers, where majority really means the financial majority. So, if the GPO has a few heavyweight Global 3000 clients that account for a significant amount of its annual revenue, guess which clients get the greatest say and the contracts they want? (Hint: Not you!)

Handing over a contract means limited control over a slew of categories.

A GPO is only going to take a contract if it can make money. Since it typically charges a small fee per transaction, it knows it needs a lot of transactions to make money. As a result, it is going to demand a set of categories that mean a minimum annual spend, and the organization is going to lose a lot of control on those categories for the length of the contract.

Handing over processing hands over control … and control over realized savings.

You are dependent on the provider to do an m-way match and detect over billings, duplicate billings, and failure to account for return credits and volume-based discounts and rebates. If they just get the invoice and pay it blindly, and the invoice for a multi-million category is still at last years prices, you could lose hundreds of thousands of dollars.

Handing over processing hands over knowledge.

Knowledge of tactical procurement processing operations, best practices, and the best and worst suppliers from a Procurement perspective is now in the hands of the provider. As tactical processors are displaced and leave, and more and more focus is put on other Supply Management activities, the organization becomes more and more dependent on the provider for even simple tasks. This makes it incredibly hard to pull the function back in house if it ever wants to, or to even switch to another provider in the future. It’s like giving the supplier Power of Attorney. Not a good thing.

Handing over sourcing is giving them the keys to the castle.

Losing control over tactical processing is bad enough, but losing control over sourcing of a set of indirect categories makes you ultimately dependent on the provider. As the great Angus and Malcolm Young said twenty-five years ago, the service provider, she got you by the …