Category Archives: Procurement Damnation

Primary ProcureTech Concern: Cost Control

This is one of the oldest concerns of Procurement. After assurance of supply, control of cost is key.

Why?

Costs are rising. Inflation is coming back with a vengeance. And the trade wars aren’t helping. Rare earths are becoming more rare. Geopolitical tensions and actual wars are resulting in sanctions and cutting off primary supply lines. Everything is driving up costs.

Impact Potential

Shortages can cause significant cost spikes. The costs of raw materials and goods can increase 20%, 50%, 100% or more. During transportation shortages (such as those that occurred during the pandemic), transportation costs can increase as much as tenfold. Costs can cripple an organization, bring down a product or service line, and even an organization if they can no longer manufacture products at a cost that allows them to sell at a price point that consumers can afford.

Major Challenges/Risks

Price Prediction/Trend Analysis: understanding the past, current, and likely future price points to understand when the cost point of a good or service might get to a critical point where it could affect not just profitability, but operation

Impact Events: identifying which events could lead to a rapid, unpredictable, price increase for a good or service, detecting those events, and taking action the minute such an event is predicted

Sustainable Supply: identifying alternate sources of supply that an organization can take advantage of should a primary source become unaffordable or unobtainable, and ensuring those remain affordable until other primary sources can be identified

Final Words

Cost control will always be an issue because an organization can’t pay more for something than it can afford and can’t pay more for raw materials than it can sell the finished good for.

Primary ProcureTech Concern: CSR/ESG/Sustainability

Today we start our coverage on the primary concerns of Procurement leaders, starting with CSR, ESG, and Sustainability. We will discuss the why, the impact potential, the major challenges and risks, and leave you with some final words of insight.

Why?

Corporate Social Responsibility is becoming paramount because many consumers are becoming conscious of their spending impact and spending power and don’t want to buy from companies that don’t take care of their workers, corporations that pollute the requirements, brands managed by executives who endorse fascist authoritarian regimes, and so on. Unless your corporation has a (local) monopoly, being a bad brand can be harmful to your bottom line. That’s the last thing any executive response, even a psychopathic sociopathic one (because a boycott inflicts major damage to the bank account).

Environmental and Social Governance is becoming top of mind because, in most first world countries, laws have been continually introduced to protect the environment over the last three decades. Moreover, you have to comply with those laws while simultaneously pretending not to give a rat’s ass about the environment in the United States which, as we pointed out in our post on how in the corporate world, sustainability/ESG is not a priority, is attempting to roll environmental regulation back to the Early Modern Era (i.e. pre-World War II), and any corporation not on board with that mission gets on the administration’s bad side.

Finally, sustainability is becoming important because many organizations are reliant on diminishing natural resources; crops are increasingly being wiped out by natural/climate disasters; and consistent, large, energy and water requirements necessitate sustainability to stay in business. Even if they don’t really care about CSR or ESG, they still need sustainability.

Impact Potential

Let’s face it.

  • We’re in an age where boycotts can cost Billions — and that’s exactly what could happen if your brand is perceived to be particularly heinous with respect to human rights in the supply chain, egregious with respect to its environmental damage, spine-chilling with respect to its sustainability, or reprehensible with respect to its far-right organizational ties.
  • Violating one of the many regulations, especially in the EU, can be quite costly. There can be massive fines, seizure and destruction of goods, and if you attempt to import hazardous or banned substances, even criminal charges.
  • Not minimizing energy, fresh water, or non-renewable material requirements can greatly increase costs and decrease supply assurance — neither is good for profit.

Major Challenges/Risks

Regulations: There are dozens of major regulations in Europe alone that you need to be aware of. Violating any single one of them can be disastrous, as per our regulatory compliance risk post.

Investment Requirements: Sustainable, affordable, clean energy and water often requires a lot of up front investment if there are no renewable energy plants or water desalination plants in the area. It also costs a lot of money to upgrade designs to use less non-renewable materials or alternative requirements, especially if there are a lot of redesign and testing iteration cycles that will need to be undertaken.

Supply Assurance: while you attempt to transition to a more socially responsible and environmentally aware organization. This is a top barrier for a reason!

Final Words

Whether or not you believe in climate change is irrelevant. Natural disasters have increased five fold over the last five decades, a pace that has not been equalled in recorded history. We’re running out of fresh water and struggling to produce enough energy, especially in the age of AI where a single model requires a multi-billion dollar centre to support it! Even without natural disasters, some regions struggle to produce enough food. Thus, sustainability is a major concern because the sustainability of the business is at stake.

Primary Concerns for Procurement Leaders

In our last two series we noted that Deloitte recently released their annual latest and greatest CPO Survey with the help of Spend Matters, that was designed to highlight, among other things, the latest and greatest “observations, challenges, and trends” in Procurement, but that, in reality, just highlights the same problems, priorities, and barriers it found in the past 9 editions, just like every other annual survey in Procurement.

There’s no embellishment here. We mean every other study that has come before for years because:

  1. the doctor has been reading them.
  2. the doctor went back through 15 studies in detail that were released in the past five years and a few other related papers published in the same timeframe.

As part of this in-depth review, the doctor pulled out, for each of these 20 papers (which included papers from the usual suspects like Kearney, CapGemini, E&Y, PWC, and Everest), the

After doing so, the results were that, for the Deloitte study, analyzing the:

  • top barriers, of the 10 quoted in 2 or more of the papers, 7 are in the Deloitte study,
  • major procurement risks, of the 7 quoted in 2 or more of the papers, 5 are in the Deloitte study, and
  • primary concerns, of the 13 quoted in 2 or more of the papers, 8 are in the Deloitte study.

Moreover, if we were to abstract the barriers, risks, and concerns one level and start looking at the underlying systems or processes that would need to be addressed, the similarities would be even more significant.

More importantly, they aren’t changing much year to year, and aren’t going to change much for the next decade at least.

A year ago I penned a post where I pointed out that before you get all excited to learn about trends for fall conference season, with the exception of:

  • Gen-AI being the new fluffy magic cloud
  • Fake-take (sorry, intake) being the new dangerous and dysfunctional dashboards

the majority of trends that have been discussed for the past year are the same trends that were discussed ten years ago (and SI has the blog history to prove it, especially since it doesn’t purge over half of the blog history on a site upgrade and/or migration).

This is because the core purpose, and thus the core priorities, challenges, and risks, of Procurement haven’t changed in decades. The systems have evolved, the processes have become more complicated, and the global supply challenges haven’t been this bad since the nineties, but the core HAS NOT changed (and, to be fair, has NOT changed since the first manual was published in 1887 and has NOT changed much since cross-continental trade began thousands [and thousands] of years ago).

Which means we don’t need any more annual surveys on these issues (every 5 years would be more than enough, and even then you might find that the only movement is related to the hot tech of today vs. the hot tech 5 years ago, as SI did when it did its trend analysis last year).

In our last two series, we also noted that we weren’t going to bore you by digging up two decades of studies and showing the same issue lists again and again, because that’s not the problem. The real problem is that these core issues still aren’t adequately addressed after decades of these “studies” being published, even though it’s the same issues again and again that come back year after year after year, sometimes with a vengeance when an unexpected natural disaster or pandemic strikes, a war breaks out, or a fan of the Gilded Age believes that tariffs are the cure-all and starts global trade wars.

However, before you can solve these problems, or anyone can put forth a solution, you need to understand what these issues are, why they keep coming back, and acquire some insight into how you might deal with them once and for all and finally move the needle forward.

In our last two series we focussed on the barriers to success and the risks. This time we are going to focus on the thirteen (13) concerns that consistently stay front and center in these surveys and reports, of which eight of them are among the top concerns in the Deloitte survey.

  • CSR/ESG/Sustainability ([01], [03], [04], [06], [08], [09], [16], [17], [19])
  • Cost Control ([01], [08], [10], [11], [16], [17], [19])
  • Talent Acquisition/Upskilling ([00], [01], [03], [08], [10], [16], [17])
  • Compliance ([01], [04], [06], [12], [19])
  • High Inflation Pressure ([00], [04], [11], [19])
  • Supplier/Supply Chain Resiliency/Continuity ([00], [04], [08], [11])
  • Tech Transformation Delays/Obsolescence ([12], [16], [17], [19])
  • Geopolitical Uncertainty ([00], [12], [19])
  • Economic Downturn & Deflation/Recession ([00], [12], [19])
  • Managing Digital Fragmentation / Digital Transformation ([00], [01], [11])
  • Tightening Credit Conditions ([00], [12], [19])
  • (Gen-)AI Integration/Impact ([03], [04], [19])
  • Weakness & Volatility in Emerging Markets / Trade Wars ([00], [12])

It is hoped that you enjoy the continuing coverage!

Finally, remember to review our article on why You Don’t Need To Read Another State of Procurement Study for the Next 5 Years! if you want to dig up the referenced papers.

Dear Influencer: One Final Piece of Advice!

In our first two instalments, we gave you the top ten things you can do to be the Preeminent Procurement Influencer. While that’s more advice than anyone else is going to give you without a large retainer, we’re not done yet. We have one final piece of advice for you.

Find your next job sooner than later!

You might think this is crass, but the doctor has your best interests at heart because, being one of the last remaining OG analysts and bloggers who has now been in this space for two and half decades, he knows the cold hard truth.

You’re getting into it for the fame, thinking the fortune will come, but it won’t.

You need to remember that THIS IS PROCUREMENT. It’s Not Public Relations. It’s not Marketing. It’s not even Sales. You’re not selling to someone who’s cool. You’re selling to someone who’s less cool in the corporate culture than the IT Squad locked in the basement, who has significantly less budget and oversight than the IT Squad because the C-Suite at least understands their e-Mail and ERP needs supersized servers (even if it doesn’t, because that was what was required two decades ago and they haven’t learned anything about IT since) and their shiny new gadgets (laptops, tablets, smartphones, and Garmin GPS devices which are great for hiking the Himalayas) cost big bucks, and someone who has almost no say into corporate decision making and goal setting. Moreover, you’re selling to a function which has the least professionals of all functions across the business, as well as the least jobs (about 500K in the US compared to about 2.5M marketing and 5.5M sales professionals in the US). They are few and far between.

As a result, that rush of getting new likes and followers isn’t going to last very long because you’re not going to get that many followers no matter how hard you work, how often you pump out that flashy content we chronicled earlier this week, or how cool you are. The first few hundred followers will come very fast, the next few thousand will come at a good pace, but then, things will slow down. The gratification and dopamine highs from seeing those numbers trend up will be fewer and further between. Right now, the most popular influencers in our space on LinkedIn have about 30K followers. Think about that. 30K followers, when most big name influencers have 100K+ or 1M+. That’s not very many, and that’s because of the very small market you’re targeting. If there are only 500K in the US, that means the number of professionals you’re targeting across North America, the UK, and EU (where LinkedIn is popular) is only a little over 1M — and they aren’t all on LinkedIn.

Thus, at the end of the day, there’s no fame.

And there’s no fortune either.

I don’t know if you bothered to do your research, but like most actors and actresses (who have to waitstaff or do odd jobs just to survive on their cans of tuna), most influencers don’t make money! YouTubers who get 1Million views a month can’t even pay their rent on that. UNLESS YOU HAVE A MILLION FOLLOWERS AS AN INFLUENCER, YOU CAN NOT MAKE A LIVING OFF OF IT!

But I can get sponsors? Good for you. You might pay your (office) rent on that, but you won’t pay your bills on that either. Ask the OG bloggers.

The daily grind is all there is. The ongoing, never ending, slog that will be there day after day, week after week, month after month, year after year with no fame, no fortune, and no reward.

And if you’d stop to ask why there are so few bloggers, sorry, content creators, left in our space, even fewer that have been doing it for more than a couple of years, and next to none that have been doing it for more than a decade, and did your research, you’d know that it’s because many started thinking it would be cool and fun, get them recognition and renown, and it would eventually pay off big.

But after a couple of weeks, months, or years, the vast majority of these bloggers, sorry again, content creators, realized that it’s not cool and fun (it’s just hard work), the breadth of recognition and renown was much (much) less than they dreamed, and the money, well, it just wasn’t there. They still had to make their living as a procurement leader, consultant, or startup founder — which, as we know, already required constant overtime before the content creation.

Dear Influencer, This Is Your Life! And let me save you some heartache by telling you now that You Don’t Want It. So figure out what you want to do and go do it. You’ll be much happier if you do. (Because no one is going to write your content creator obituary when you suddenly stop one day because you’re just too tired to keep going. the doctor stopped keeping track after the first hundred (100) or so dropped off. Yes, you read that right, hundred or so. Shortly after THE PROPHET and the doctor started almost two decades ago, we went from maybe a dozen bloggers to over one hundred, and then back down to less than two dozen three years later. They didn’t last, and you won’t either.)

Most of the time, it’s only the strong survive, but in our space, it’s only the non-sociopathic masochists with a pressing need to try and educate (or at least intellectually stimulate) others that survive. (And the doctor hopes THE REVELATOR agrees!) In other words, if you’re mentally well balanced, your chances of success are about equivalent to a pig flying through hell fast enough to keep the snowball from melting …)