Category Archives: rants

Driverless Delivery? Tantalizing Theft Target!

With the emergence of drones and, now, self driving cars, a number of delivery companies are promoting these as low cost delivery options to companies that want to reduce delivery costs, especially for small businesses shipping low volumes (that fit in a large van or small truck) or retailers doing B2C delivery. But are they really low cost?

Yes, drivers cost money because, like all workers, they expect to be paid. And if you could obtain a driverless vehicle for the same price of a driver-required vehicle, you would save. But driverless vehicles come with a higher price tag. Now, the argument is that over the lifetime, the savings from a reduced driver workforce will cancel out the increased up from cost, and this would be true if the driverless option were as reliable as the driver-required options.

Now at this point, you’re probably asking what madness has the doctor contracted because, unlike humans that get sick, get lazy, make mistakes, and need rest — as long as the equipment gets the fuel and proper service, the software can drive it 24/7 — and this is true. The equipment can run 24/7, but this doesn’t mean you’ll get your stuff.

First of all, if there’s a programming error, or GPS error, there is no one there to detect and correct it. If GPS steers an Uber off course (and it does regularly in big cities with lots of tall buildings … sending multiple Ubers in a row a block away from where I was in Chicago recently despite the fact I was very sure to provide the address and not accept the default GPS location), the driver can say “there’s no one here”, call, and figure out where to go. If GPS steers a delivery drone off course, the customer’s neighbour gets a free gift and you get to eat the replacement cost as the credit card company is not going to rule in your favour in a dispute where the customer provided correct shipping information but you delivered to the wrong address. And the cost multiplies if an entire truck is shipped to the warehouse next door and you can’t prove it. (Even if you can, it does not mean you will get your goods or money back.)

But the biggest problem is that there is no guarantee that the goods will even make it to the destination. Goods being delivered driverlessly are very tantalizing theft targets. Not only is there no security to worry about, but there is no driver to even notice a theft as it is happening, report it, and get descriptions of the perpetrator — which means 0 chance of recovery. And do not think for a second that insurance is going to cover it in a cost effective manner. As claims start rising, and investigations into reasons continue, rates are going to either become unaffordable for driverless delivery options or become nonexistent options for the average business.

The argument that the drone is not interceptable until it drops low enough to deliver the package is not going to hold because signals can be hijacked and they can be hacked. (If top of the line cars can be hacked, how hard do you think it is to hack a bottom of the line drone?). And the argument that the delivery vehicle is secure until it reaches its destination is not going to hold either because if thieves can bust open a lock and rob a moving delivery truck with a driver unnoticed, how hard is it going to be to do the same to a driverless one. (Answer, even easier — no one to see the theft. Cameras do not count. They are easily hacked if they are digital and easily blinded by LED lights.)

Driverless trucks are already becoming theft ring targets, and delivery drones will soon be the target of bored hackers everywhere who will be able to get stuff en-route and not have to wonder if the order on the stolen credit card number will go through before the theft is detected and reported.

Driverless delivery is a tech-dream, but, for the time being, is not a Procurement one. You have been warned.

One Hundred and Seventy Years Ago Today …

Marked the first publication of the Cambridge Chronicle, the oldest surviving American newspaper. This is a very long time for a publication to survive. A very long time. Especially when many publications in today’s internet age only last a few years. Even the Red Herring ceased print publication in 2007, less than fourteen years after it was founded. (There was a time when it was as popular, if not more so, than Wired, an internet age publication that actually survived the internet age, but which still is only 23 years old.)

Even the New York Times did not start until five years later (and celebrates it’s 165th birthday on September 18 of this year). This blog, while the second oldest surviving independent blog in the Supply Management space (at 10 years), is just a blip when compared to the Cambridge Chronicle. Let’s hope that digitization does not wipe these publications out because ad-sponsored journalism is not really journalism at all. (When even South Park knows the danger of ad-funded “journalism”, you know something is very, very wrong.)

Societal Sustentation 45: (A Lack of) Math Competency

While Procurement needs to be able to deal from a full deck of skills (and SI has compiled a list of 52 unique IQ, EQ, and TQ skills a CPO will need to succeed, which will eventually be explored in future posts over on the Spend Matters CPO site once the outside-in issues, agenda items, and value drivers have been adequately addressed), many of the skills that Procurement requires rely on math. In fact, with so many C-Suites demanding savings, if a Procurement Pro can’t adequately, and accurately, compute a cost savings number that the C-Suite will accept, one will be tossed out the door faster than Jazzy Jeff gets tossed out of the Banks’ manner.

But, especially in the US, strong math skills are not in abundant supply. As per a 2010 SI post on how This is Scary! We Have to Fix This that referenced a MSNBC article on Why American Consumers Can’t Add reported on a recent study that found:

  • Only 2 in 5 Americans can pick out two items on a menu, add them, and calculate a tip,
  • Only 1 in 5 Americans can reliably calculate mortgage interest, and, most importantly
  • Only 13% of Americans were deemed “proficient”. That means
    less than 1 in 7 American adults are “proficient” at math.

So even if the Procurement Leader has strong math skills, it’s likely that not everyone on the team does. And even if the Procurement team has decent math skills, the chances of every organizational buyer having decent math skills is pretty slim. So you need to figure out how to ensure poor math skills don’t affect your performance. What should you do?

1. Make sure you know your team’s math competency.

If you need to, have each team member take a math competency test. You need to know their level of capability, and if you can’t get university transcripts, then you need to figure out their university equivalent math competency.

2. If they are not up to snuff, get them the courses they need – at your expense.

You have smart people. You hired them. They have talent, they just need a bit more math. So allow them to enrol in college or university courses, give them the time to improve their skills, and pay for the courses.

3. Acquire systems that make the math easy.

Give them systems where they can collect all the data, run accurate side by side comparisons and analysis, define formulas, and automate computations. The easier it is for them to create the models, analyze them, and make the right decisions, the better.

4. If possible, acquire systems that guide them.

For example, an optimization-backed sourcing system that asks them about the type of constraint, the split in a split award, and any filters and then creates the equation for them, where they only have to approve, vs. your buyers trying to do complex modelling in a spreadsheet is going to be more accurate and save you more money.

For math competency to improve overall, the importance of a math education has to increase overall. That is going to take some time. In the interim, work with what you got.

Benchmarks are Bad — But Don’t Just Take My Word For It!

A decade ago, Jeffrey Pfeffer, the Thomas D. Dee II Professor of Organizational Behaviour at Stanford University’s Graduate School of Business, wrote a book with Robert Sutton called Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management (Kindle), in which they stated there were three inherent problems with benchmarking. Especially external benchmarking.

1. If your business strategy is simply to copy what others do, then the best you can hope for is to be a perfect imitation.

2. When you benchmark, all you see is the most visible and superficial aspects of the company you are benchmarking.

3. When you try to copy, you forget to ask “should I copy this? is it right for me”?

It’s not who’s spending the least on inventory with JiT (Just-in-Time) supply chains, or who has the lowest labour costs (with warehouses in Georgia and Wyoming), or who has the lowest transportation costs (through mega-volume contracts with a single carrier), etc. It’s not even who has the lowest cost supply chain (although that’s a great start, just look at Apple for inspiration). It’s who has the biggest profit and biggest brand reputation — and that is the organization who manages to extract the most value from every dollar spent.

You don’t get value from a benchmark — the most you can get from a benchmark is an idea of where value may lie. And while this is a great start, especially since, if properly defined, it allows the organization to see where it is doing well against it’s defined metrics and goals, it’s only the start.

Moreover, if the benchmark is ill-defined, it can often hide huge over-spend. The organization could easily be over-spending by 10% or more, operating quite inefficiently compared to it’s potential, or focussing its effort on low return activities — something it will never know unless it continually challenges the benchmark and looks for ways to redefine what the baselines should be. But benchmarks, when they turn green, often lull the organization into a false sense of security. Which is scary. Because …

The reality is that benchmarks are filled with traps and hidden dangers. And if you don’t want to step on a landmine, you should download The Dangers of Benchmarking (registration required) today and identify the six major hidden dangers of benchmarks, four of which are easily eliminated with the right application of a(n optimization-backed) sourcing platform.

Why Create RFP Hell?

Over ten (10) years ago, over on the LawMarketing Blog, Larry Bodine asked Why Go to RFP Hell? in response to a fellow lawyer who asked how her firm could get more RFPs for legal work from corporations. This question is as relevant today as it was then.

As Mr. Bodine quite astutely noted, RFPs are onerous chores leading to hideous events where clients get the chance to dictate terms, chisel down your fees and turn you into a fungible commodity. Nobody wants to be fungible. Moreover, RFPs were liked to competing to be the first to be hanged.

Why? RFPs were typically 50-page monstrosities divided into a dozen sections that required a complete history of relevant litigation, minority hiring statistics, alternative fee arrangements, financials, references, industry knowledge, and so on — all to make a short-list. At which time, if the firm was not considerably better than the incumbent in the eyes of the buyer, they would not see a penny. It is a hell.

A hell unnecessarily created by buyers who believe that they cannot even consider a supplier for an event before they know everything there is to know, even though a single piece of information can disqualify the supplier from consideration before any negotiations ever begin.

This is not a good thing to do. A company with a reputation for putting its potential suppliers though RFP hell is not one that many suppliers will want to deal with. The more a supplier’s peers complain about RFP hell with Company X, the fewer are the suppliers who will even acknowledge the existence of an RFP from Company X. As the word of RFP Hell from Company X spreads, the only suppliers that will respond to an RFP from Company X are those that are desperate. Those in bad financial shape, those without a stable customer base, and those with a bad reputation. These are not suppliers you want to deal with.

If you need to cast a wide net to find new suppliers, start with an RFI that only requests enough information to determine whether or not an RFP response from a supplier can be seriously considered. And before this RFI is issued, make sure to understand the category need in detail and what the absolutes are and that the RFI addresses each absolute. If multi-lingual support is an absolute, if a platform that encrypts 100% of data is an absolute, if a company with a headquarters in a country where it can be held responsible and liable for its products is required, or if a company with a factory with certain equipment is required, the relevant questions should be asked in the RFI. You should never ask a supplier to complete a 50-page RFP until you are sure the supplier can meet every absolute requirement. You can ask them even if their chances, based upon their initial RFI response, are less than 1% (as long as you make the award criteria, and weightings, abundantly clear), but not if their chances are known to be zero. (With complete requirements, award factors, and weightings clearly known, a supplier should be able to determine its own chances and determine whether or not its investment of time is worth it.)

And then, make sure that if you need a supplier to complete a lengthy RFP, that the RFP is well written. For details on how to write better RFPs, see the ongoing series over on Spend Matters Plus (membership required) by the anarchist, the maverick, and the doctor, of which 3 parts are already up.

  • I: Intro & Issues
  • II: Requirements
  • III: Provider Secrets