Category Archives: Procurement Damnation

Societal Damnation 42: Pandemics

A pandemic, as defined by Wikipedia, is an epidemic of infectious disease that has spread through human populations across a large region. When people think of pandemics, they traditionally think of the big nine historical pandemics of cholera, influenza, typhus, smallpox, measles, tuberculosis, leprosy, malaria, and yellow fever, which have, at one time or another, wiped out thousands, hundreds of thousands, and sometimes even millions of people.

However, many of the diseases that cause pandemics are still alive and well, and new ones are cropping up all the time. Cholera, easily spread by contaminated water, is caused by bacteria, and still causes 100,000 deaths a year world wide. Influenza is constantly mutating and new strains of bird flu and swine flu which, without proper treatment and prevention, could easily cause millions of deaths are alive and well. And while typhus (typhoid fever) has mostly been eradicated, cases are still being reported in poorer African and South American countries and the bacteria still exists.

As far as we know the smallpox virus has been eliminated in the wild, with no reported cases in 38 years, but never say never, as typhus, which should also have been eradicated by now, is still cropping up. There are still almost 500,000 reported cases of measles a year, even though immunization against measles is easy. Tuberculosis is caused by bacteria and infects about 1% of the global population each year, with 9 Million new cases in 2013 and almost 1.5M deaths.

Leprosy still affects almost 200,000 people globally a year. Malaria, caused by parasitic protozoans transmitted by malicious mosquitos, is still rampant with over 200 Million infections a year, which resulted in 660,000 deaths in 2010. Yellow fever is another infection, caused by a virus, transmitted by murderous mosquito, that infects about 200,000 people a year and annually kills 30,000. And while these pandemics are primarily restricted to the equatorial climates, as temperatures warm and climate changes, those pesky mosquitos could start to migrate northwards.

But this isn’t the only list of highly contagious infectious diseases we have to watch out for. In addition to the ongoing HIV/AIDS pandemic, now we have SARS (Severe Acute Respiratory Syndrome), a viral disease that cannot be cured or prevented that has an average fatality rate of 10% and that spreads easily by close person-to-person contact though respiratory droplets and which could spread like the great fire of 1666 through a dense metropolis. We also have the five strains of the Ebola virus, which spreads easily through contact with bodily fluids (including respiratory droplets or sweat) or infected bats or primates, and Ebola has an average mortality rate of 50%. We have the Marburg virus that causes Marburg Hemorrhagic fever which is a rare, but severe, fever caused by a filovirus (like Ebola) that has a mortality rate of up to 80%. We have hantavirus pulmonary syndrome with a 36% mortality rate in the US that is spread by contact with exposure to droppings of infected mice. (Which means an uncontrolled mice population could bring a new black death that, with unprecedented levels of population density, puts the first round to shame. Remember, just because mice commissioned the earth, that doesn’t mean they won’t kill us all when they are done with their little experiment.)

We could go on, but you get the picture. Not all countries have centres for disease control as advanced as the CDC or the ability to rapidly contain epidemics which could, in today’s hyper-connected and ultra-densely populated world, easily transform into global pandemics overnight. Hollywood might worry about us all contracting a hyper-infectious disease that turns us into zombies, but the reality is that the next plague will probably skip that step and make corpses of us all instead.

So why is SI being so grim? Because, despite the focus of most sites that focus in on the physical, financial, and information supply chains, the reality is that supply chains still run on people. People (control the machines that) make the goods. People control the money (even if it is just the people in banks sometimes). And people input the data that our information systems run on. Without people, supply chains will come to a halt from both an inbound (with no one to supply) and an outbound (with no one left alive to buy) perspective. Not only must we be ever vigilant in keeping our employees safe, but we must be even more vigilant in keeping them well. We need them alive.

And for those dreamers among you, you can forget about replacing your workers with robots or computer algorithms. Remember that we have been promised replacement robot workers since Elektro was debuted at the 1939 New York World’s Fair, but engineers still have not delivered. Not just because we have no true AI (and that’s a good thing*), but because we are still unable to construct systems as flexible and adaptable as the organic systems created by nature.

* what use would intelligent robots have for ugly sacs of water besides to harvest our bioelectric energy?**

** bonus points if you get the two references contained within

Geopolotical Damnation 29: Trade Embargoes

Today’s supply chains depend on global sourcing and global trade. However, a single trade embargo with a single country on a single commodity can disrupt an entire supply chain. If you depend on apples for your primary CPG product line, beef for your restaurants, or rare earth minerals for your cell phone, and your primary supply line gets cut off, now what?

Or, even worse, if the country in question decides that gaming systems are destroying society and your main product is a gaming system, that gambling is now illegal and your main products are video lottery machines, or that coal is too dirty to burn and your company is a mining operation, instead of case closed, it could be business closed. (And all of these situations have happened in recent years!)

Note that an embargo is more than just a block on trade, it’s also a restriction on trade that restricts how much can be imported or exported or the tariffs that are charged to import or export. For example, China recently ended it’s export quota for rare-earth minerals essential for high-technology products including smartphones. But what if it’s re-instituted, and re-instituted more restricted than before? Especially when they supply up to 97% of the rare earth minerals needed worldwide?

Or what happens when a country decides that it wants to enforce a buy-local policy and increases import tariffs on a category from 10% to 100% or more? For example, last December the US Department of Commerce announced new anti-dumping and anti-subsidy rates for PV (photovoltaic) products imported from China and Taiwan, with the primary CVD (chemical vapour decomposition) rate for Trina Solar increasing from 18.56% to 49.79% in less than six months. This is nothing compared to the “China-wide” rate of 165% for smaller PV providers! But the US isn’t the only company that does this. Every country in the BRICS is constantly changing their import rates as well, sometimes in response to North American or Europe rate changes, sometimes in response to local taxpayer and/or lobbyist demand. (Brazil recently updated its HS code 80 times in one year!)

Needless to say, a tripling of the import/export rate or a restriction on exports that cuts your limited supply in half can be almost as damaging as a full embargo against a commodity or product. If the restriction results in a widespread failure to meet the demand, which in turn results in bad press, the end result could be considerable brand damage and a widespread migration of your customers to your competitor. This drop in revenue puts the entire company at risk, which will greatly impact the Procurement budget and the ability of the department to perform!

Economic Damnation 02: Bank Failure

As per Wikipedia, a bank failure occurs when a bank is unable to meet its obligations to its depositors or other creditors because it has become insolvent or too illiquid to meet its liabilities. Since some banks, including the Federal Reserve, have a license to literally print money, most people think that bank failure is impossible. But since some banks over invest in hedge funds, high risk mortgages, or commodity markets, it can happen and it has happened.

Banks have been failing since they first incorporated, and the fiscal crises in the late 2000’s caused the failure of a number of really big banks, including Washington Mutual, Lehman Brothers, and Bear Stearns. And regardless of how many new acts are passed to try and insure banks limit their risk exposure or keep enough cash on hand to cover withdrawals or payouts in the case of a loss, banks will still fail. Regulators will never keep up with the new and inventive ways banks and investors will come up with to invest, and lose, money (and shady replacements for hedge funds and high risk mortgages will soon be on the way), and banks will continue to fail. Possibly even yours.

And if you depend on that bank for letters of credit and inventory based loans, this could be more of a problem than losing any cash above the FDIC (or equivalent) insured amount. Having your critical supply lines stop, your production lines go down, and revenue losses mount by the day as you search for a new bank, new lines of credit, and new inventory loans will be far worse than a short term cash loss which can happen anytime a market shift causes demand for a high-selling product to suddenly drop, forcing a fire sale of a large amount of remaining inventory.

And, as per the Wikipedia article, the failure of a bank is relevant not only to the country in which it is headquartered, but for all other nations that it conducts business with, especially if the bank owns investment subsidiaries in those markets. People are put out of work. The local economy drops. And everyone suffers. Yet another damnation waiting around the corner.

When Debating Where To Open Your Procurement Centre of Excellence

May we recommend getting way ahead of the curve and selecting Merv, Turkmenistan, which is the oldest and most completely preserved of the oasis cities along the Silk Roads in Central Asia and which was likely (briefly) the largest city in the world in the 12th century. It’s a World Heritage Site which has likely been continuously inhabited for over 5,000 years, centrally situated between Asia and Europe, and not that far from the Arabian Sea (which leads into the Indian Ocean which is, as we know, situated between the South Atlantic and Pacific Oceans).

We all know that nations and societies rise and fall and that what once was great can be great again, with China being one of the best examples. Over the last few thousand years it went from the global powerhouse to a closed society back to the global powerhouse which is projected to soon be the largest economy in the world in terms of GDP. Russia is in the same rise and fall cycle and when it rises again, its rise will likely bolster the surrounding former Soviet Union countries as well.

But most importantly, it’s about as close as you’re going to get to the Door to Hell, and given that Procurement is Hell, as we have been painfully illuminating in our 101 Damnations Series (with links to the first 50 posts indexed), it just seems to make sense.

 

photo by Tormod Sandtorv

101 Procurement Damnations – We’re Almost Halfway There

Our last post chronicled our 50th Procurement Damnation that you, as a Procurement professional, have to deal with on a regular, if not daily, basis. If only these were the only 50 damnations clouding your mind and getting in your way. There are still 50 more damnations that are just as pervasive that seemingly exist only to pester you on a daily basis that we have not yet discussed!

However, before we get to the next 50, 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 as this is SI’s biggest and most aggressive series to date, 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 10 parts up and available for your reading pleasure.

There’s more that could be said, but much has been said in the 50 posts published to date and much more will be said in the next 50 posts, so, without further ado, here’s the first 50 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!