Category Archives: rants

Nine Rules for Insuring the Dash For Cash

CFO World recently published a short piece on “ending the dash for cash” in which they outlined then steps to success that an organization can take to help shrink working capital in which they got it all wrong.

Good working capital management doesn’t shrink working capital, it enlarges it. So, in the spirit of Mark Perera’s “Nine Rules for Stifling Supplier Innovation” (Old St Labs), Sourcing Innovation gives you nine rules for insuring that you will eventually have to dash for cash to keep your business afloat.

  • Focus on recently overdue accounts. If the customer has a history of paying on time, but just missed a payment or two, even though chances are they just screwed up because they haven’t implemented proper e-Invoice Management and temporarily misplaced your invoice, call them up and give them a stern lecture on how deeply disappointed you are in them.
  • Insist that there is no acceptable excuse for late payment. Even if the excuse is that the customer is disputing the amount you charged them because you failed to apply a discount or mistyped the quantity they actually received (because there is no integration between your shipping system and billing system and a data entry clerk has to key in quantity). Insist they should pay now and you will resolve the dispute later.
  • Never change your standard payment terms. They worked ten years ago, why shouldn’t they work now?
  • Pay on your terms, no matter what. Who cares that the supplier has to borrow at 20% annual compounding interest to float your 120 day payment terms. That’s their problem, right?
  • Don’t fret the inventory. If sales ordered it, they’ll move it when they’re good and ready. It’s not your problem, it’s the COO’s.
  • Forget next quarter. Wall Street is only going to judge you on this quarter, so do whatever you can to put the books in the best possible light, especially if it’s year end. You’ll figure out next quarter when next quarter arrives.
  • Link performance measures to year-over-year profit. Again, that’s all Wall Street cares about, so forget about those pesky savings targets, sustainability initiatives, or long term cost reduction measures. They never materialize anyway, right?
  • Focus on quarter-over-quarter cash on hand and net income reporting. Reporting on increases in current and future liabilities just dampens everyone’s mood unnecessarily.
  • Don’t be a sucker for early payment discounts. It lowers your cost, but it lowers your cash on hand even more — and that’s what Wall Street will judge you on.

Follow these rules and I ensure you that, sooner or later, you will be making a dash for cash.

Just Like There Is NO Free Lunch, There is NO Free Shipping!

Paul Downs is right, There is No Free Shipping. (In fact, the Free Shipping Amazon Prime service is so profitable that Amazon is planning to raise their prices and profit off of their best customers even more!)

Even though shipping is no where near as complicated and human intensive and error-ridden as it used to be (provided someone scans the damn code, reads the response, and loads the item into the designated truck), it’s still costly, and will always be because:

  • Every form of transportation requires a vehicle*
    and all vehicles have acquisition and maintenance costs.
  • Every vehicle requires some form of power
    and all forms of power have a cost, even if they are based on renewable resources (as someone has to build and maintain the windmill). So, even if your item can be shipped locally on a hybrid powered by renewable energy, the cost will not go to 0.
  • Every vehicle requires an operator
    even if that operator is the programmer maintaining the system controlling the drone, and operators need to be paid.

This assumes you are shipping a normal, everyday item that is typically ordered from an online merchant and for which packaging and shipping has been optimized.

This doesn’t account for the situation where you are ordering a fragile item, which may need extra, and/or special, packaging, an oversized item, which can’t just be tossed in the mail or picked up in a normal UPS or FedEX delivery, or a very heavy item, like the custom-made conference tables that poor Mr. Downs had to ship across the country at a time where piece-shipping was even more of a pain the backside than it is now. In each of these cases there are extra costs in packaging, handling, pick-up, and delivery (as some items will require LTL freight through a local or national carrier).

In other words, shipping is expensive and anyone giving you free shipping is including it in the price, probably at a padded mark-up. So don’t fret the shipping, fret the total cost of the purchase relative to the value received. Sometimes if you shop around you can get a better product at a lower overall price, shipping included. (Going back to Amazon, it’s amazing how much some of the third party merchants that use Amazon’s Prime Shipping mark up their merchandise to cover the shipping costs. the doctor has seen $40 to $60 small items that ship for a few dollars almost double the MSRP, some of which even ship for free at half the price on other sites, because the online retailers are still making a profit if they can get someone to pay MSRP.)

So when you are buying a commodity or a consumable, whether for personal or business use, always look at the TCO. It’s often the case that a supplier who breaks out shipping is attempting to keep costs low across the board for both parties. That’s the type of supplier you want to deal with.


* Since we are talking about shipping and anything that can be walked down the street by a human is not considered shipping for Procurement and Logistics purposes.

You Can Have Your Google Chauffeur. I’ll Choose Good Ol’ Alfred Every Day of the Week!

For those of you who thought the doctor was needlessly calling #badwolf last Sunday in response to the automotive industry’s push for autonomous automobiles, SI would like to point out this recent BBC News article stating that Toyota is to recall 1.9 Million Prius hybrids.

Why is Toyota recalling 1.9 Million Prius hybrids? A software fault that may cause the vehicle to slow down suddenly. To date it has identified more than 400 reports of the problem, with the bulk of them occurring in (the heavily congested streets and highways of) Japan and North America. According to Toyota in limited cases, the hybrid system might shut down and the vehicle will stop, perhaps while being driven.

In other words, all a hacker has to do to cause multiple fatal multi-car pileups is hack the OnStar network and send a signal to all Prius’ vehicles to execute that specific part of the code. They don’t even have to break the OS and figure out how to craft a small virus that will hijack the control system or execute a dangerous set of commands — the hacker just has to send a signal telling the OS to execute the set of commands already there.

Now, presumably, this would (hopefully) result in the brake lights being triggered and the outcome may not be as deadly as it would be otherwise, but what about the other 99 Million Plus lines of code. How many similarly dangerous, untested, and, as-yet, unexecuted code sequences are also in the Prius? And every other electronically controlled car on the road?

They’ve yet to release a personal OS that isn’t riddled with more holes than there are potholes in Canada’s winter roads*1! I’m all for technological advance, but until we figure out how to write more bullet-proof, and secure, operating systems, let’s keep the OS out of the car and on the desktop where it belongs.

Now if you’ll excuse me, I have to go help LOLCat tell some meddling kids to get off my lawn!


*1 A slice of swiss cheese is quite solid in comparison!

Sadly, It Looks Like the doctor’s 2014 Procurement Prediction is Going to Come True!

In Prediction Time Again? Ugh. (Part I and Part II), the doctor predicted that 2014 will be 2013 part II and 2009 part VI. Specifically, this means that

  • the focus will continue to be on cost-cutting and not value-creation,
  • valuable, high-ROI, technology will continue to be ignored, and
  • the training and new talent budgets will remain empty.

According to Deloitte’s recently released Global CPO Survey, 79% of CPO priorities have cost reduction as their #1 priority.

According to the Hackett Group’s recent EPM Executive Perspective on Technology Enablement: A Critical Piece of the Performance Management Puzzle, 63% of world class and 82% of peer group organizations still create management reports using spreadsheets as the primary business application.

And ProcureCon’s just-released “State of Indirect Procurement Benchmark Report”, which was complied from the responses to a benchmarking questionnaire distributed to ProcureCon Indirect West’s audience of procurement and sourcing practitioners, found that 55% of attendees at the event felt that their Procurement team was not adequately staffed and 60% of their organizations had no plans to increase the team size.

It’s a dismal state of affairs indeed.

If you need ideas to help kickstart your Supply Management organization and get out of this quagmire, consider joining the doctor at the inaugural ProcureCon Canada event (and register with code PCA14SI). Let’s share ideas, knowledge, and a commitment to moving the discipline forward, even if we need to light a few fires.

Some Things Should Be Autonomous, But Automobiles?

As per this recent K@W article, automakers are working hard to advance the state of the automobiles, and that’s a good thing, but should the ultimate goal be autonomous, driver-less vehicles?

While park-assist, remote control parking, trailer assist, construction site assistant, blind spot monitor and the pre-crash occupant protection system and other safety systems are a good thing, there’s a difference between adding technology to alert a driver to danger and creating a car that drives itself in an effort to remove the human element. While human error is the leading cause of accidents, it’s not the only cause of accidents. Sometimes an animal, or human, jumps in front of the vehicle or an object falls in front of the vehicle, sometimes something breaks and the vehicle can’t be stopped, and sometimes a natural disaster happens.

If there’s not enough time to stop, a computer is not going to be able to stop the car; if something breaks, a program can’t fix it; and if an unexpected event occurs, will the algorithm know how to deal with it? For example, even if there’s no time to stop, a human might be able to take evasive action and avoid hitting a person who steps in front of the vehicle without warning. But if the only choice is hitting a person or hitting a building, will the algorithm make the right choice? (Cars and buildings can be fixed, dead people can’t). Or will it keep calculating to infinity in hopes of finding a collision-free path of action, and hit the human in the process. What if the failure causes a disconnect between the core processor and the brakes? What if an earthquake happens? Will the algorithm be able to interpret the readings correctly?

But more importantly, what if the system crashes? The average car already has more lines of code in its operating system than in an average computer operating system. As per this article over on the MIT technology review, many cars have a hundred million lines of code in their operating system. For comparative purposes, Windows 7 has about 40 Million lines of code. How many lines of code is it going to take to create an operating system that can drive an autonomous vehicle that performs well enough for a government to consider allowing it on the road? Hundreds of Million, if not a Billion. That’s a lot o code. How do you adequately test that much code? You don’t. You can never guarantee that the code is error free and that system won’t crash. You can only test until the probability is high enough for you to accept as likely to be error free in practice.

And what happens if an unexpected event happens at 70 MPH on the highway and the system crashes? Nothing good.

But the real concern is what happens when the OS is hacked? Your computer gets hacked, you lose your personal and confidential information and the computer becomes inaccessible to you until you unplug (and reboot) it. If your car gets hacked, it becomes inaccessible to you until you cut the power. You can’t do that at 70 MPH, and since all cars are being built with 4G, bluetooth, wifi, etc. — if a hacker gets control of it while you are on the road, he can crash your car into another and there will be nothing you can do.

And if the hack is the result of a bug in the OS that allows for a massive zero-day exploit, a hacker could take control of all cars on the road on the same communication network, and cause them all to accelerate until they hit something. If tens of thousands of vehicles were hacked and subverted all at once in a zero-day exploit, the widespread damage that could be caused would be hundreds or thousands of times worse than most terrorist groups currently achieve when they manage to hijack a plane or blow up a single building.

In other words, removing the human completely from the picture doesn’t increase safety, it decreases it. If we must have autonomous vehicles, then they better all come with an old-school code-free manual override switch that, in an emergency, will let us turn the computer off so we can drive home safely and tell those darn kids to get off our lawns.