Category Archives: rants

What Will It Take for North America to Embrace Sustainable Energy?

Fracking might get us more natural gas, but the process of drilling and injecting fluid into the ground at high pressure in order to fracture shale rocks to release the natural gas is risky.

First of all, there are the hundreds of chemicals used in the fracking fluid which include a number of dangerous carcinogens and toxins such as lead, uranium, mercury, ethylene glycol, radium, methanol, hydrochloric acid, and formaldehyde which can, and do, leak into ground water suppliers. For example, methane concentrations are 17x higher in drinking-water wells near fracturing sites than in normal wells. And it’s a sure thing that some of the fluid is going to leak considering at most 50% of the fracturing fluid, that is not biodegradable, is recovered.

In addition, some of this fracking fluid will evaporate and release harmful volatile organic compounds into the atmosphere that can contaminate the air and create acid rain.

If something goes wrong, the well can explode, and, in addition to killing and injuring workers, spark fires that can burn for days. This happened recently in Pennsylvania, where Chevon decided that it could offer free pizza to make up for deadly fracking explosion.

If too much gas is released, gravity can bring the earth down to fill the empty chambers and create massive sinkholes that can swallow entire towns. This is what happened last year to Bayou Corne, Louisiana.

In other words, while it works, it’s just not safe — in comparison to solar, wind, and water power which is plentiful, safe, and provided for free by mother nature. Now it won’t solve all of our energy problems, and we’re not going to be running trucks, trains, and planes on renewable energy any time soon — but, combined with natural (pump storage, etc.) and man-made “battery” arrays (which could include water and geothermal storage in addition to lithium-ion storage), it could solve more than half of our global energy problem with the appropriate balance and investment.

And if even the CEO of a known fracking company isn’t comfortable with fracking in his own backyard and is joining in on anti-fracking lawsuits (like the CEO of Exxon, as per this Salon article), that should tell us something.

The Logistics Shortage Keeps Getting Worse

At least if reports are to be believed. According to a recent Fortune article on “supply chain jobs”, the shortage is up to 1.4 Million jobs by 2018. Wow! Especially when estimates last year put the driver shortage at a mere 240K. While logistics needs talent in high tech, analytics, robotics, engineering, seasoned managers, marketers, data analysts, and maybe even human resources, it primarily needs drivers — no drivers, no shipments. No shipments, no logistics industry.

And when you think about it, big data scientists go where the money is; high tech workers go where the tech is; robotics engineers go where the robots are; marketers are attracted by cool message and money to burn; most industries are shedding managers, who need work; and HR is HR. I don’t think forwarding thinking logistics companies are going to have any trouble attracting high tech, engineering, marketers, managers, or even HR talent. They’re going to have problems attracting drivers and warehouse workers — the same type of people they’ve been having problems attracting for a decade, because, in North America, transportation ain’t sexy, doesn’t pay well, takes a toll on your health, and still puts you in risky situations. As explained in SI’s last post on the subject, until these issues are addressed, the problem will remain.

And The US Government is Letting the Patent Pirates Plunder Away …

With the exception of Nova Scotian Pirates, Sourcing Innovation is quite negative where pirates are concerned. But not all pirates are created equal – some are much more pernicious than others. And the most pernicious of all the pirates are the Patent Pirates who should be made to walk the plank as soon as possible.

But thanks to the slow movement of the Senate Judiciary Committee, which broke for April Recess before finishing what would have been a historic deal to curb the scurrilous practices of patent trolls, as per this recent VentureBeat article on how Waiting for Patent Reform is Costing Us Billions, they are taking bigger hauls than ever. If the pirates of old had known how profitable it would be to plunder patents, they would have used their black magic to put themselves into a Rumplestiltskin sleep for 300 years so that they could wake up to the richest haul in history. (Even the haul of the richest Columbian drug lords pale in comparison to the haul of the patent pirates.)

To put the problem into perspective, the U.S. Economy loses approximately $1.1 Billion to the patent pirates for every two week delay! Imagine what it could do with $1.1 Billion. Not only do we need a “loser pays” bill for patent lawsuits, but we need a bill that prevents patent trolling in the first place! Patent plundering kills innovation – not something the US economy can afford right now.

If You Do Not Get Sustainable Results, Blame Yourself! (Repost)

This post ran two years ago today. Two years later, the problem remains because a number of organizations still have not figured out it’s Sourcing and Procurement and follow-through. Solutions need to be end-to-end or savings leak!

Let’s Talk!

It’s deja vu all over again!

Robert Rudzki is not the only blogger and consultant to recently hear that a potential client had, just a few years ago, hired a large consulting firm to do a high-profile “strategic sourcing program” with nothing sustainable to show for it, as he indicated in his recent SCMR blog post on Deja vu all over again. I’ve heard the same sentiments echoed to me by a number of consultants at a number of small and mid-size niche and specialty services and software providers in the e-Sourcing & Supply Management space in recent months.

It would appear that a common trend last time money flowed into laggard Supply Management organizations before the recent downturn was to simply hire a Big-X consulting firm to fast track the organization to strategic sourcing success. While this is a great way to fast-track a project, and a contract, that is expected to result in significant savings, the only thing that is fast-tracked from a finance perspective is payment to the consulting firm that runs all the way to the bank! As leading Supply Management professionals know, a contract does not guarantee savings. The only way to achieve savings is to execute against the contract and make sure savings are realized. Just because you have a new contract that allows you to source widgets at $8 a pop, instead of $10 a pop, this doesn’t mean you are going to save $200,000 on your annual purchase of 100,000 widgets. For the savings to materialize, all of the following has to happen:

  • the buyer has to place the order with the contract supplier
  • within the contracted lead-time and the supplier
  • has to ship on time
  • using the approved carrier and shipping arrangement
  • and pay all required third party and government export fees
  • and file all appropriate paperwork at the same time your organization, or a 3PL acting on your behalf,
  • files all of the appropriate import and compliance paperwork
  • and pays any associated duties to make sure that
  • the product arrives at the warehouse when its supposed to
  • where it is received, inventoried, and appropriately stored which results in
  • an invoice being accepted and verified against the contracted rates and
  • paid at the appropriate time only when all goods are received and verified as acceptable.

Simply put, if

  • the order is placed with the wrong supplier
  • or placed late and the order has to be expedited
  • or shipped late and a different shipping method has to be used
  • or export documents are not filed on time
  • or fees are not paid and fines are issued
  • or import documents are not filed on time
  • or taxes are not paid and fines are issued
  • or the product is not properly inventoried or stored and can’t be found and unnecessary replacements need to be ordered
  • or the invoice is not verified and the old rate is still being charged
  • or the invoice is paid late and a penalty is applied

then those (significant) savings negotiated on your behalf go out the window. And you’re not going to get them back! First of all, once they’re gone, they’re gone. Secondly, because you weren’t actively involved in the project and didn’t insure that the knowledge that you required to achieve a sustainable transformation was transferred, you’re not going to be able to keep costs down when you renegotiate the contract in this economy where supply is tightening and costs are rising. So you’ll pay even more, even if the rate should stay almost flat.

In order to get results, you have to work with the consultants to understand the strategic sourcing process, the strategies applicable to your organization, the goals of each individual project, the savings opportunities in each project, the key contract terms, the changes that need to be made to capture the savings and adhere to each contract term, the key metrics, the measurements that need to be made regularly, and the warning signs that something is happening / has happened that could jeopardize the savings the organization expects. Failure to do any of this is a sure-fire way of making sure that nothing changes and that your organization continues to leave money on the table.

In short, if your organization continues to be one of those organizations that leaves up to 40% of the contract value on the table because you did not do all of the above, don’t blame the service provider unless you did all of the above. As Charles, Bill, and Bob said in their recent books on The Procurement Game Plan, Managing Indirect Spend, and Next Level Supply Management Excellence, success is your responsibility and you have to actively manage your service providers and make sure that the knowledge required for a sustainable transformation is transferred to you.

So put an end-to-end solution in place. And let’s Never Talk Again about this!

Big Data = Big Mistake

FT.com recently published a great article on Big Data that asked Are We Making a Big Mistake which contains the best description SI has seen yet for Big Data: Big Mistake!

Why? Because, even though there are times we might want correlation to be causation (because then we could put an end to IE once and for all), it is not, never was, and never will be. never, Ever, EVER!* And, as pointed out in the article, just because a correlation algorithm works great for predicting trends, such as the spread of influenza, three years in a row, this doesn’t mean it’s going to work well the fourth year. Randomly identified statistical patterns in data are just that — randomly identified statistical patterns in data.

The Google example in the article is a huge example of how big data can fail in a massive, embarrassing way. In Nature 457, published 19 February 2009, Google published a paper entitled detecting influenza epidemics using search engine query data that detailed how they were able to track the spread of influenza across the US more quickly than the Centers for Disease Control and Prevention (CDC). Using a big data algorithm that detected a correlation between what people searched for and and whether they had flu systems, Google was apparently able to track the spread of influenza with only a day’s delay, compared to the week or more it took the CDC to assemble a picture based on reports from doctors’. This theory free approach worked for four years, and then failed spectacularly in 2013 when it drastically over-estimated peak flu levels, as chronicled in this article on When Google Got Flu Wrong over on Nature.com.

To put the issue of correlation vs causation into terms everyone can understand, if correlation was causation, Microsoft would be on trial as an accomplice to felony murder in every state in the United States, since the declining usage of internet explorer directly correlates with the declining murder rate in the US:

In other words, if correlation was causation, then using Internet Explorer invokes violent tendencies which leads to murder, and its continued existence is criminal.**

This is the problem with big data today. Everyone is using it to try and detect potentially useful correlations, instead of trying to support or disprove useful, actionable, theories. Why? Because, as the FT.com article states, figuring out what causes what is hard, and some would even claim it to be impossible.

Correlation might work in the short term, as it did for Google that was able to predict the spread of influenza for a few years, but it always fails in the long term. And if you have no idea what is behind a correlation, you have no idea what might cause that correlation to break down. Just like a stock market trading algorithm, it might work for a year, a month, a week, a day, or a minute. You just don’t know.

That’s why relying on correlation-based big-data algorithms is a big mistake. While they will give you interesting patterns to examine, relying on them will lead you down a dark and winding road that leads to the edge of a deep canyon (that you are aren’t going to see until you fall in). Unless you can come up with a reasonable theory and support it with the data, it’s just an interesting pattern — and you should continue on your merry way until you find an interesting pattern you can actually explain unless you too want to end up with egg on your face.

That’s why Sourcing Innovation Still Prefers Big Brains to Big Data, and likely always will. We might be slaves to the corporations in the continuum, but that doesn’t mean we have to be slaves to stupidity.

* Everyone should know by now that correlation is not causation given that Pinky and the Brain gave you all a great Lesson in Statistics six years ago (when they were still in the employ of a certain Burlington sourcing provider …)

** It’s distribution was criminal for a while when Microsoft tried to create a browser monopoly by embedding it in the Operating System in a way that led Windows users to believe there was no other choice, as monopolies are illegal in many countries, but, I’m sorry to say, the continued existence of IE is not criminal, just sad and frustrating.