Category Archives: rants

Even China Knows that You Should Home (Market) Source!

SI has been telling you since 2007 that you should be Home Sourcing. SI has outlined the Advantages of Home Country Sourcing, shared a great post on Home-Shoring from the Manufacturing Innovation Blog, and given you another reason to source close to home. But have you listened? For the most part, no.

But you should, or this is another area where China is going to eat your lunch too. As per this recent article over on the Washington Post that asked if U.S. Manufacturing [is] Making a Comeback, a Chinese company has just set up a factory in the United States!

This January, Lenovo (which acquired IBM’s PC business in 2005), a Beijing-based computer maker, opened a new manufacturing line in Whitsett, N.C. to handle assembly of PCs, tablets, workstations, and servers. Why? According to Jay Parker, President for North America, it needs the flexibility to assemble units for speedy delivery. But, more importantly, the math adds up. Chinese wages are on the rise, the risk of loss to piracy (at sea) is increasing every year, and we have reached the point where the higher North American labour costs can be offset by savings on logistics. And Chinese companies know logistics costs as good as anyone. (As per Sunday’s post on China Packaged Goods, with a [major] stake in 16 global ports, thousands of shipping lanes, and a fifth of the world’s container fleet, China pretty much sets the prices for Ocean shipping these days.) A barrel of crude oil that was $27 in 1993 and $35 in 2003 is now $88 in 2013, inflation adjusted. That’s over a 3X increase since the early stages of the outsourcing craze. And China wages have increased so much in China over the last decade that a new study just found that labour costs are now 20% lower in Mexico. (Source: SCDigest) Plus, the wage gap between China and North America is expected to shrink to a mere $7 per hour by 2015! When you factor in logistics costs and loss due to theft, IP theft, and (ocean) piracy, that’s nothing! (Especially when the US is on pace to have lower manufacturing costs than Europe and Japan by 2015! There’s a reason Nissan, Honda, and Toyota are exporting from the US. That’s right, exporting from, not importing into.)

When you add it all up, and consider the production efficiencies that come from our ability to constantly innovate better processes, it just makes sense to bring (last stage) manufacturing back to North America. (Especially when the productivity of North American workers keeps rising.) Maybe you still outsource key components, but you certainly don’t outsource washing machine production, for example. The last thing you do is ship empty space or dead-weight.

The Cloud is Not a Crystal Ball Either!

Despite the fact that I’ve told you that The Cloud is NOT a Fluffy Magic Box, given you More Reasons the Cloud is Not a Fluffy Magic Box, reminded you Yet Again, the Cloud is NOT a Fluffy Magic Box, told you that The Cloud is Filled with Hail, and pointed out that The Cloud is Not a Magic Mirror Nor is it Omniscient, it seems that there is a new brand of silicon snake oil salesmen who want you to believe that that the cloud is a crystal ball that you can use to talk to people everywhere in the world.

Just yesterday someone informed me that a new company is going around trying to sell a cloud business phone system.* What the heck is that? And how does it work? Do I walk outside and shout up to the sky? What if it’s a clear sunny day and there are no clouds in site? Or the middle of the night and I can’t see the clouds through the fog? And how does it handle inclement weather?

And no, the doctor is not being silly. Given that we don’t know what cloud really is**, and that, with (tele)communications, you HAVE to know the origin point AND the destination point, how the heck do you send a phone signal into the cloud and ensure it reaches the right person. Presumably it is built on dynamic, replicated, peer-to-peer IP routing, which sounds great in theory, but may not even be legal in practice considering your business might be in a locale where your phone system has to be 911 compliant. Since no one would know where the signal is coming from, this type of system would never be 911 compliant!

Basically, as I pointed out in Dogbert Translates Cloud-Consultanese, they’re pulling a Dogbert hoping to find a Pointy Haired Boss who will believe their mumbo-jumbo and buy their silicon snake oil solution at a ridiculous mark-up before anyone else in the company realizes that significant money has been wasted on betaware that’s not even as good as products you can get for free (like Skype and Google Voice, for example).

You’ve been warned!


* They didn’t tell me the name of the company, presumably to protect the guilty and give them a chance to smarten up knowing that this absurdity really grinds the doctor‘s gears and typically results in a rant.
** If Larry Ellison has to ask What the Hell is Cloud Computing, that’s telling!

Ditch the Dashboards Before they are Your Downfall!

How many times do I have to tell you that (real-time) dashboards are dangerous and dysfunction, that dashboards really are dangerous and disfunctional, and that integrated dashboards are deadly? Seriously! How many times?

There’s a reason that Dashboards are one of the seven deadly software sins, and it has nothing to do with vanity or pride (as they are the idiot lights, after all). It has to do with sanity.

But still, I see ridiculous articles like this recent article over on Inbound Logistics on business intelligence in the supply chain that discusses reporting and real-time dashboards, neither of which have even the slightest connection to “intelligence”.

Dashboards have two big problems. First of all, as SI has repeatedly pointed out, they give you a false sense of security. The ship could be sinking but because the “pump performance” light is green, you think everything is okay. If the pump can only pump 158 Gallons per minute, but the ship is taking on 790 Gallons per minute, you’re not going to be in good shape for very long!

Secondly, they often give you a false sense of urgency. For example, the “on time delivery” light could be red, indicating that 30% of your shipments are late. If you’re a CPG executive worried about hitting your number, you’ll quickly calculate that this could increase your stock-out rate another 3% (based on an average stock-out rate of 8%) and decrease sales by 5% (as fast moving products sell more), go into panic mode, and start screaming at your suppliers, ruining the good relations that your Supply Management team had spent months building – when, in fact *every* delivery was on time. How could this happen? Let’s say the warehouse workers are slow and consistently get to supplier X’s shipment at 9 am, which is ready and waiting to be unloaded at the scheduled time of 7 am. Now, if the technology illiterate warehouse worker enters the receipt time at 9 am, even though the truck was there at 7 am, the binary logic dashboard will say the shipment was late (even though it wasn’t), along with every other shipment that really wasn’t late. However, you will have already ruined the relationship with what was likely a key supplier, who will likely quote you significantly higher at contract renewal time, because you assumed the system was right. And if demand is greater than supply, you might even be dropped as a customer, and experience a supply disruption as a result. And with every disruption comes a 40% chance of business failure within five years. In other words, SI is not exaggerating when it says that a single dashboard could ultimately lead to the downfall of a large organization.

So next time someone tries to sell you a sleek new dashboard, tell them to go back to the cloud they came from and shove it somewhere the sun don’t shine. Real intelligence comes from applications that let you slice and dice data, not from applications that give you cookie-cutter reports that were slapped together quickly by a low level coder who doesn’t really know your business.

No Matter Where You Stand, There’s Always Room for Improvement!

As pointed out in our recent post on Where We Will Find Solutions to our Supply Management Problems, Denmark may have taken fourth place overall in the Global Creativity Index, but it was only 14th in tolerance. Let’s hope it remembers this on the 20th anniversary of the
Maastricht Treaty Referendum which resulted in riots in the NØrrebro area of Copenhagan, which was the first time since World War II that police opened fire against civilians (and injured 11 demonstrators). Protests should be peaceful — on both sides.

What’s the Biggest Supply Chain Risk?

Us!

The biggest supply chain risks are not bankruptcy and plant failure, they are not unusual and damaging weather patterns, and they are not natural disasters. As clearly pointed out in the Supply Chain Risk Leadership Council (SCRLC) in their 2013 Emerging Risks in the Supply Chain study, the biggest risk is us — the human race — as a collective whole.

To see this, let’s review the fourteen (14) risks that were identified and discussed.

  • Climate Change
    A key contributor to climate change is the amount of carbon emissions we are producing. We keep burning oil, coal, and natural gas, and we keep doing so without any significant attempt to trap and sequester the carbon back in the ground it came from, allowing it to creep back into the atmosphere and increase the carbon dioxide percentage.
  • Global Supply Chains
    We keep outsourcing and offshoring even though, in May 2012, the total industrial capacity utilization in the U.S. was a mere 76.3%. To put that in perspective, one in every four plants is sitting idle at any one time.
  • Increasing Social Inequity
    Less than 1% of households control 40% of the world’s total financial wealth, with inequality ranging from their 34.5% share in the U.S. to their 70% share in China. And we don’t seem to be doing much about it, especially given the number of tax shelters available to the extremely wealthy in much of the developed world.
  • Gender Imbalance
    The one-child policy in China and the cultural history of favouring boys over girls in India has led to the situation where, in the next decade, there will be significantly more men of working, and marrying, age than women. People, trying to fix one problem, created this problem instead.
  • Population Increase
    Statistically speaking, we are expecting a population increase of almost 30% by 2050 where we expect the earth’s population to be 9 Billion people! We’re all contributing to this.
  • Population Migration
    It was only six years ago that the urban population exceeded the rural population. By 2050, we will have 70% of people living in urban areas. We are creating the mega-cities which, instead of being a sustainability boon, are, in many cases, an environmental nightmare.
  • Global Democratization
    What is likely to happen is that instead of replacing years of corruption, political repression, and economic disparity with stable democracies we are going to end up with the chaos and disorganization that could arise from new political systems being established by individuals with little governing experience.
  • Dependence on Information Technology
    We have come to rely on information technology to the point that when the software fails, we are immobilized. We allowed ourselves to become too reliant on technology.
  • Government Financial Crises
    Governments, run by politicians that we elect and allow to stay in office, around the world have taken on too much debt.
  • Government Social Policies
    In many countries, the majority view is that social policies are not properly funded, not equitably applied, and not equitable with those of whatever nation is currently being looked upon as the best role model for social governance. But we elected the government that created and maintains them.
  • Global Economic System Disruptions
    We created the rules that govern the financial systems that are starting to break down.
  • Social Media Threats
    Social engineering, anti-brand campaigns, and other socially-based attacks are all people-driven, not technology driven.
  • Global Mega Cities
    All over the world, we keep building mega cities and keep moving into them, creating extreme levels of congestion and infrastructure problems.
  • Aging Population
    Thanks in part to the baby boomers, we are getting older as a population. The number of people over 60 is growing at a rate that is 2.5 times the population growth rate.

In other words, directly or indirectly, people are the cause of the majority of supply chain risks, and that’s why supply chain visibility and third party management, focussing on the management of people, is so important.

(And while we’re all to blame, as hinted at in the study, the 1% deserve at least 34.5% of the blame! Their unequal tax treatment is a big reason we’re so deeply in debt and can’t adequately support social programs. Statistical models have demonstrated that their campaign contributions play a significant part in who gets elected and forms the governments that control our social, economic, and trade policies. They are collectively the biggest social inequality. And they could do the most towards moving us to sustainable energy models.)