Category Archives: Procurement Damnation

Technological Damnation 91: Proprietary Madness

It’s bad enough that we have to deal with IP & Patent Madness, as chronicled in our post on the 89th (Technology) Damnation, but proprietary madness is likely to drive us all mad (and may someday push the doctor over the edge, into the land of the crackpot, where at least one blogger in the space is already dwelling).

Just what is proprietary madness? It’s mega-corporations, especially in software and electronics, taking the rights of ownership to extreme. Started, and continued, by the current and former Technology heavyweights, including the likes of IBM, Microsoft, and SAP, it’s not only the creation of company specific standards for software and hardware interfaces, its the restriction of the specification of those interfaces to approved partners and suppliers, limiting the supply of support services and related products to a handful of vendors. This not only drives up the price of those products and services to well above the market average price for support services for software and products with open and published specifications, but can make it difficult, if not impossible, to get support when demand is high or related products if one of the few vendors who can produce products shuts down.

Those of you with SAP know exactly what we’re talking about. Unlike Oracle, which publishes its core schema, and does not change it between minor versions, SAP does not publish its score schema, does not guarantee any stability between bug updates between minor versions, such as between 4.7.1 and 4.7.2, instead requiring you to go through its proprietary NetWeaver interface, which you will, of course, have to acquire to actually support any customizations (and likely build applications in the Portal). And learning the portal is no easy task. One of the most complete books on it is 700 pages alone! Then you need to find the documentation on the data stored in each R3 module you are interested in and how to get it out. There’s a reason that not every shop does SAP support — and that’s because, even though SAP now has a lot of documentation on their website, you need weeks of expensive training just to learn the basics of Portal Development, R3 interface, and the core data types and record types used to pull the data you need out of R3 and push modified data back in. Getting to the point where you are effective at developing and integrating custom supply chain applications requires months of training and mentoring and years of experience. As a result, it’s typically only SAP partners who can provide this support. In contrast, with an open Schema, as found in Oracle and MySQL, all you need is SQL experience and the interface library for whatever language you are using (whereas NetWeaver limits you to Java) — which makes it much easier (and cheaper) to not only find support resources, but vendors with best of breed software modules and platforms that can plug and play with Oracle right out of the box!

But it’s not just software vendors that create proprietary technologies, it’s hardware vendors too. Dell, IBM, HP, etc. all have custom control and administrative solutions for their server platforms. Want a third party virtualization platform to work out of the box on a new server configuration and take full advantage of the capabilities? forget it! You’ll probably have to wait six months to a year or more before third parties, like VMWare, are optimized and configured for those platforms (assuming that the full specifications are published upon technology release and licenses for custom drivers aren’t required), making their administrative software a must if you want to upgrade to the latest technology, and not upgrade to technology that was outdated a year ago.

But it’s not just IT companies that have proprietary technologies and interfaces. Big electronics companies do this too for most of their consumer (and even enterprise) electronics, including companies like Samsung (and its new Mobile AP core) and Sony (and its new ultra high definition TV technology).

And while there is nothing wrong with proprietary technology, as a company needs some assets in order to survive, the lengths at which some companies go to keep it secret and protect it, in a world where data needs to be shared and products need to be utilized with other products makes development (and the supply chains that rely on that development), a nightmare.

We need open standards and open interfaces. The sheer existence of IE alone should make that clear. (There’s a reason that many new IT start ups simply won’t support it anymore, and that’s because they can write stuff that runs almost flawlessly in Chrome, Firefox, and a dozen of other browsers or that runs almost flawlessly in a single version of IE on Windows platforms only, but not both. Since Chrome and Firefox and similar clone browsers run on all major platforms, and IE doesn’t, and since Chrome and Firefox almost fully support the open standards, whereas IE supports the Microsoft standards and those portions of the open standards it feels like, and, to top it off, [older versions of] IE allows case insensitive JavaScript!) Restrictive proprietary standards and interfaces just make life unnecessarily difficult.

But too many companies are too big and powerful, so it’s not going to happen and we’ll be forever wasting countless hours checking interface requirements, versions, and support availability instead of focusing on whether or not the technology meets our needs and will help us get our work done. It’s more daily damnation for all of us.

Societal Damnation 43: Rapid Urbanization & Mega-Cities

There are a lot of societal damnations converging upon your organization and threatening ruin. To date, we’ve covered the sharing economy, crime & piracy, fraud & corruption, (the lack of) education quality, the utter lack of math competency, (mega) project management, and Everything-as-a-Service (XaaS). Today we’re going to cover rapid urbanization and mega-cities.

You’re probably wondering why this isn’t a good thing. More people in less area means the organization can sell more goods in a smaller area and this means Logistics has less areas to ship to and Procurement fewer areas to buy for. This is true, but it doesn’t mean that Procurement’s or Logistic’s task is any easier. In fact, while rapid urbanization can often make Sales’ and Marketing’s job easier, it can make Logistics’s and Procurement’s job harder. Much harder.

Typically when a city starts to rapidly urbanize, it’s infrastructure is not ready for the rapid urbanization. It’s water plants are stressed (and may not be able to accommodate the introduction of factories that require large amounts of water). It’s energy grids are stressed (and it’s not unreasonable that rolling brown-outs or blackouts could be temporarily required at peak periods). It’s public transportation is stressed (and even getting a taxi can be a 45 minute ordeal). It’s roads are stressed (and there can be regular delays to pick up and drop off goods at cross-docks and warehouses). Plus, it’s core roads may only be 2 or 4 lanes in many places, with large trucks prohibited – meaning that Logistics will have to secure, and use, a number of smaller trucks for pickups and deliveries — which means a need for more drivers in an industry where the driver shortage is in the tens of thousands in some countries. And then there’s waste management. The sewer system could be taxed (with the end result that the rivers are used to handle the excess until they run full of waste like the Mithi river). The capacity to collect garbage might not be there (which leads to stringent limitations on how much trash a home or business can throw out unless they haul it out of town to dump by themselves). And process and recycling stations could be overloaded (leading to a stench, unhealthy buildup of noxious fumes in the air).

Then comes a rapid increase in pollution, which can see a rapid increase in hazardous airborne (smog-inducing) particles to the point where it is almost triple the national air quality average (as is the base in Beijing). This will, of course, eventually result in legislation to limit the amount of pollution an organization can produce, which will, if the organization hasn’t planned for it, result in costly production plant and fleet retrofits that could easily cost millions of dollars. However, this probably won’t equal the increase in taxes that will come if the city, state, or country tries to clean up its problem and decides to spend billions of dollars doing so (as China is about to in preparation for its bid to host the 2022 winter olympics, an effort that will cost about $7.7B using the exchange rate of August 16, 2015).

But the trials and tribulations don’t stop there. Rapid urbanization is also typically associated with a rapid increase in crime (though often temporary from a long-term perspective, this temporary increase can still last decades), pandemics (as nothing spreads airborne and waterborne bacteria and virii faster than density), taxation to pay for the necessary improvements to infrastructure and social programs, a quickly changing political and regulatory environment, and a greater potential for mass hysteria and riots. Rapid urbanization can bring with it dozens of damnations, each of which will directly and indirectly affect Procurement on a daily basis.

Sales and Marketing may do the dance of joy, but they really ought to be shot in the foot for doing so as the good can often be outweighed by the bad in the short term, and the amount of rapid adaption that Procurement might be forced to deal with may not be worth it.

Regulatory Damnation 35: Health and Safety

Health and Safety, generally referred to as Occupational Safety and Health (OSH) or Workplace Health and Safety (WHS) in North America, refers to regulations and regulatory management concerned with the safety, health, and welfare of employees, be they full time, part time, contingent, day labourer, or unpaid intern. In an advanced organization, it’s a key component of CSR (Corporate Social Responsibility) as the health and welfare of any person doing any task for the organization is a key concern of any responsible organization.

So why is this a damnation? Is this not only the right thing to do but something you want to do as an injured or unwell employee is not productive? It’s a damnation because in some countries of the world, it’s becoming a regulatory nightmare. And not only is failure to comply with the regulations, some of which may go beyond common sense, a huge fine, but if someone gets injured and your organization failed to comply with the regulations, in some countries (and the United States in particular) that’s a million-plus lawsuit waiting to happen.

It’s a massive risk management activity that often adds very little value to the organization.

First, you need to either have your lawyer spend cycles researching all relevant OSH laws to your business at the municipal, state, and federal levels and make sure you are fully compliant, or shell out thousands upon thousands (upon thousands) of dollars to an expert OSH law firm that will provide you a list of all regulations you need to adhere to, minimum requirements, and example programs.

Then you need to identify all hazards of the

  • physical and mechanical variety
    and make sure all personnel have the appropriate safety gear and safety training and supervision if they are new to the task
  • biological and chemical variety
    and make sure all personnel have the appropriate safety gear, training, and supervision and make sure that the risk of exposure is minimized as much as it can be (and only qualified, certified personnel are allowed in the lab where the deadly virii are kept)
  • psychosocial variety
    and make sure all personnel are kept as far away from them as possible (which may mean keeping the CEO away from general assemblies, as he* is likely a psychopath)

Then you need to document your research, your policies, your training methods, your enforcement methods, and your regular review activities in case the OSHA (Occupational Safety and Health Administration) or its equivalent comes knocking at your door (as the result of complaints, injury, and/or lawsuits).

And if you’re in Procurement, not only do you have to worry about the safety and health of your employees (who might have to travel to dangerous regions for site visits of what could be danger-ridden factories), but of your supplier’s employees as well. If their practices aren’t up to par and a major disaster happens at one of their facilities, it’s your corporate brand that is going to take the hit when the dust settles and multiple worker’s rights group are quick to point out the failings in your supply chain.

It’s yet another time-sucking task that should be easy and obvious but isn’t thanks to mountains of legislation and suppliers who care more about money than people.

* Most CEOs are men. It’s probably because (considerably) more men than women have been diagnosed as psychopaths. (If most CEOs are psychopaths and most psychopaths are men, then we have a logical explanation for why most CEOs are men outside of sexism.)

Environmental & Sustainability Damnation 23: Food Shortages

So far we’ve covered natural disasters, EMPs, water, waste, rare earth minerals, and Greenpeace, but that still leaves four environmental damnations to discuss, and the next on the list is food shortages.

A few years ago, global food reserves hit a fifty year low.
With approximately 800 Million people, which is almost 11% of the global population, food insecure, and the increased rate of natural disasters, this is scary both from a social viewpoint and a corporate viewpoint. Every time there is a food shortage, the commodity prices spike, and contracts be damned.

If a significant portion of a supplier’s crops are wiped out and it doesn’t have enough to satisfy its contracts, it can claim force majeure, and unless your organization is paying the most, it’s claiming force majeure on you and your supply is out the window. If a considerable portion of its crops are wiped out, and it theoretically could meet demand, but a considerable portion of the global supply was wiped out and prices have skyrocketed, the supplier might choose to still claim force majeure and sell to the highest bidder, contracts be damned, and while you might be able to go to court and make a case that it should have fulfilled your contracts, that could take years, and you’re certainly not getting the crop this year unless you pay market price. If a major product line depends on that crop, your organization could be out of business before it won the lawsuit and recouped any damages.

Since most crops are still grown in fields, and not greenhouses (which are not as environmentally friendly as one might think if one is trying to grow crops in the summer), the right climate is needed for a good yield. Sun and warmth, but not enough to dry the plants (and bake them to a crisp), enough rain (and irrigation), a sufficiently long growing seasons, and an absence of pest swarms. A drought can quickly wipe out a crop. A fire can quickly wipe out a crop. An earthquake that can destroy irrigation systems and storage containers can wipe out a crop. And so on. Moreover, as the rate of natural disasters increases as a result of global warming (which is a bad term because it’s not just global warming, it’s global climate change on a broad scale), the rate of natural disasters that destroy crops and lead to food commodity shortages is going to increase. Diversified supply is no longer an option, but a must. Excess production and storage in diverse locations for eventual disasters is a must. Planning ahead years at a time is a must.

It’s another damnation that does nothing but increase the complexity of your job.

Authoritative Damnation #63: Board of Directors

Do we even need to say more? The Board of Directors can be your best friend, or your worst enemy. But either way, they’ll probably be your ongoing nightmare.

Their dictates drive your daily duties even more than the wacky whims of the CEO, because their dictates drive the CEO’s and CFO’s dictates, who in turn drive your daily duties. Do you really think the cost savings chant stems from the CFO alone? A good CFO realizes there are 2 big ways to make more money. Increase revenues — which can come from sales or investments — or decrease costs. An even better CFO will realize that you only have to do so much to appease Wall Street and will want to do whatever will increase revenues in the future, because that will increase the stock value, and fatten his nest egg when he sells out and retires (from the company). But if the board chants “savings, savings, savings“, his hands are tied and he will have to do his best country boy jig.

But it doesn’t necessarily end their. We all know that if this was the extent of the damnation caused by the directors, it would barely qualify as a damnation at all. Where do you think the outsourcing craze (and craze is the proper word) came from? The lease versus buy at any cost (because ownership is maintenance and maintenance is supposedly bad) craze. The move to contingent labour (because, apparently, benefits are bad too) craze. Just about any non-sensical craze you can think of usually originates from the wacky whims of a helicopter board member.

But it doesn’t end there. The board is also responsible for forced entry into markets. Forced entry into new product categories. Forced (use-my-buddy-Bill’s-business-or-else) supplier selection. And so on.

Director damnation is it’s own kind of damnation and sweep it under the table we shall not! Especially when this is one of the few damnations on our list that makes the eighth circle!