Category Archives: rants

The Control Provided by e-Sourcing is Only an Illusion – YOU HAVE NO CONTROL!

A recent post on one of the lesser known sourcing blogs indicated that, due to the lack of economic upturn in most of the developed world, maybe now is the time to finally try reverse auctions. The rationale, quotes from a CEO and his team that watched their first reverse auction that indicated that it was simple, powerful, easy to follow, effective, and, most importantly, if you read between the lines, gave them an illusion of control over the process and the results.

This, and some of the messaging coming from a few of the smaller e-Sourcing providers, is scaring me. I fear that adopters may believe that adopting this technology may give them some control. Well, as this recent article over on Chief Executive on why you should “embrace tomorrow’s strategies” clearly points out, you have NO control! You can manage the process, but you have no control over the outcomes. Why? For starters

  • Cartels, cabals, speculators, organized crime, and entire countries are constantly manipulating commodity prices.
    Case in point: China possesses over 90% of many of the rare earth metals used in many technologies (smart phones, batteries, etc.) and when they recently reduced exports, a steep price increase resulted that triggered a costly disruption of delivery of the precious commodities to global business.
  • Disasters are on the rise.
    Industrial, agricultural, and political disasters are increasing in frequency and wiping out production in entire regions. For example, the nuclear meltdown in Japan affected most businesses that rely on a Japanese supplier.
  • Global currency fluctuations, unforeseen credit crises, and economic stagnation are increasingly severe and unpredictably enduring.
    The extreme fluidity in the valuation of imported and exported goods, services, and components is as equally difficult to predict and manage.

No e-RFX or Auction is going to help you regain control over these economic nightmares that you have to deal with on a daily basis. And any provider that’s trying to sell you 1999 e-Sourcing technology to deal with the current economic stagnation doesn’t have a clue. There’s only one way you can even hope to adapt to the constantly changing reality, and that is through the adoption of a supply management platform with advanced data analytics capability. You have to constantly monitor, react, adapt, predict, plan for what-if, monitor, react, and adapt again. This requires extensive data acquisition, mapping, transformation, and analysis that only a real analytics solution, with advanced (spend) analysis, optimization, simulation, and reporting is going to provide. Don’t get fooled. All auction platforms give you in this day in age is a false sense of security. Sometimes an auction is the right way to go, but, most of the time, an auction (on its own), is not the answer.

Organizational Data is Organizational Data — NOT Department Data

While reading “Cuts from the Center”, which records a recent CPO Agenda Executive debate held during this past winter, I couldn’t help but notice Nikki Bell’s comment on how she gets frustrated when we make excuses about how we can’t have the right data, or about people protecting data. I have to agree. This is what kills Supply Management initiatives that could save the organization Millions (and in some cases, Billions) of dollars.

And it’s ridiculous. Everyone in the organization needs to know that organizational data IS organizational data and that anyone who has access to organizational data has access to ALL organizational data. And Senior Executives, starting with the CEO, have to mandate this. No exceptions. If information is sensitive, then it should be “scrubbed”, “sanitized”, or “anonymized”, and the data then made available for analysis and mining. Without complete data, you cannot do a proper spend analysis project, and without a proper spend analysis, you will not find the true savings opportunities. And if you want to recover overpayments and avoid unnecessary spending, you need to do a proper spend analysis and uncover the true savings opportunities.

Your data is your data. So mandate it’s use. Remember, if you want performance, you have to make it so.

Questions from the Land of the Obvious: Is China’s Rise Sustainable?

Not only do we have Headlines from the Land of D’oh, but we also have Questions from the Land of the Obvious. This one, in my K@W archives from earlier this year, that asks “Is China’s Rise Sustainable” is an obvious example.

Of Course it’s sustainable. Let’s start with some simple facts:

  • over 1.3 Billion People
    that’s almost 1/5th of the planet’s population
  • over 3 Trillion in Currency Reserves
    compare that to the US debt of almost 15 Trillion
  • annual GDP of 6 Trillion
    it’s the 2nd largest GDP and could surpass the US GDP in the 2020s at the current growth rate, and even if it doesn’t, it will come damn close
  • over 160 Cities with 1M+ people
    and this number is expected to exceed 300 before the decade is over as China urbanizes (and surpasses 50% urbanization); North America has around 20 such cities.
  • China is moving from low value assembly to high value add
    Foxconn produces some of the most advanced electronics in the world
  • Significant R&D funding
    By 2010, Innofund alone had invested almost 9 Billion RMB
  • Significant Infrastructure Advancements
    The 12th Five Year Guideline has significant infrastructure investments. The high-speed railway will exceed 45,000 km (which could cross Canada 6 times!), the highway network will exceed 83,000 km, new airports will be built (including one in Beijing), and 36 Million affordable apartments for low income people will be built (which could house the entire population of Canada*)
  • while we spend, they save
    They have money to spend when the time is right to buy.
  • they are Renewable Energy leaders
    They know their rate of fossil fuel consumption is not sustainable and aim to double their rate of renewable energy electricity over the next five years while building 400 nuclear power plants by 2035.
  • the party is Patient
    They realize that long term change takes a long time and that focus on quarterly objectives is STUPID! They know a long term plan is not 3 years, it is 10 years or more!
  • their civilization is truly ancient
    Their written history extends back over 2,600 years, beginning in the Shang Dynasty, and early texts recount oral histories of the Xia Dynasty that go back over 3,000 years. And, with the wisdom of age, they remember the lessons learned over the years. They were the superpower of the world for most of the last two centuries. If they hadn’t closed their borders early last century, and missed out on the Industrial Revolution, they would never have fallen. But they have learned from their error, and are investing heavily in the information revolution and the knowledge economy. Unless something drastic happens, it’s only a matter of time before they not only catch up, but regain their #1 place.

In other words, this was a headline from the land of the obvious. It’s not a matter of if the rise is sustainable, it’s a matter of how fast China is going to rise.

* which is fortunate, because, at the rate they are buying up property in our coastal cities, us Canadians may have to move there

One Hundred Years Ago Today

The Patent Frenzy began when Francis Holton filed the millionth patent in the United States Patent Office for a tubeless vehicle tire. From 1790 (when the first patent was filed on July 31) to 1911, only one million patents were filed. In the last hundred years, almost fourteen million patents were filed, with over four million in the last ten years alone. Crazy! No wonder the software patent pirates [still] plunder away!

I wish they would follow Napolean Bonaparte’s example and retreat to the South Atlantic to live in Exile. Saint Helena still exists and I certainly won’t stop them from recreating the voyage Napolean embarked on 196 years ago today!

Perfect Procurement Processes Will Not Save the Public Sector

There’s lots of hmming and hawing on both sides of the Atlantic about how the Public Sector has to reduce spend to help get deficits under control and how it needs better procurement processes to achieve this goal. Why, I don’t know, because even perfect procurement processes won’t save the public sector. I could write a treatise, but until the following fundamental problems are solved, there’s no point.

  • Past Performance Does Not Affect Current Awards
    This is so ridiculous its absurd. No private company in their right mind would say “you just screwed up this 500 Million system overhaul, but here, please bid on this other 500 Million system overhaul”. None. Nada. Zip. Zilch. (At least not if they wanted to stay in business.)
  • X% Must Go to Minority/Domestic/Preferred Suppliers
    And while we’re at it, let’s just tag on 10% for the United Way. After all, they claim their overhead is now under 15%. (FYI: The overhead of a best-in-class, private, Supply Management Organization is a fraction of that.) Supply Management is about the best buy. Period. Diversity/Domestic/Preferred should only come into account when all other factors are equal or if they bring value that outweighs additional costs.
  • Salary is based on pay scales out of touch with reality
    Supply Management success requires top talent. And if you’re only going to offer 50% of the going market rate, you’re not going to attract anyone who’s any good. While there should be pay scales to insure fairness, they should be adjusted annually based on regional averages and existing employees making less than the minimum when the pay scale is adjusted should automatically be adjusted to the minimum before the annual raise and/or bonus is calculated.