Category Archives: rants

Is There Magical Thinking In Your Procurement?

Recently over on the Dilbert Blog, Scott Adams penned a post on “The Magical Thinking Opposition” where he noted that his hypothesis was that the political side that is out of power is the one that hallucinates the most -– and needs to –- in order to keep their worldview intact.

And this got the doctor thinking if there is a corollary that says the Procurement department that is getting the worst deal is the one that hallucinates the most — and needs to — in order to keep their worldview intact.

Why does he posit this? Typically the Procurement departments most against modernizing their processes or platforms are those that are doing the worst and think they are just fine with the processes or platforms they have. These laggards are not only without modern platforms, but resistant to their acquisition and implementation. They are not modern Procurement departments, but traditional Procurement departments that still run on the island of misfit toy principle — staffed with people who are nearing retirement (and being rewarded with a cushy purchasing job), related to the boss (because you can’t fire a relative of the boss), and who have been in the
organization too long to let go (but who are not suited for their current jobs anymore).

But this is not the only way to identify these Procurement organizations. You can also tell them by these telltale arguments against modernization:

  • Our processes are fine, we just need more people to implement them.
    They think that their lack of results is lack of resources, not the processes or the platform.
  • Out platform is just fine, we just need more people to maximize its potential.
    They don’t believe that the throughput is a problem of an outdated platform, just a lack of resources.
  • It’s not worth the cost, and it will slow us down.
    They fight modernization and change, usually based on outdated views, beliefs, or stereotypes.

They feel that all they need is a little more time, a few more resources, and then everything will work out a-ok with the help of a little pixie dust. It’s magical thinking, and there’s no room for it. Just like alchemy needed to be replaced with science, magical thinking needs to be replaced with realist thinking.

Procurement and Finance is not a P2P Love Story …

… it’s a bitter rivalry to the bitter end. It’s a feud that makes the Hatfield and McCoy war look like a bitter spat. And you know what, that’s just the way it should be.

Simply put, it’s the CFO’s job to stop spending and it’s the CPO’s job to spend … spend as wisely as possible, but, in a perfect world, spend every dollar that goes out the door that is not a payroll dollar, a lease dollar, a tax dollar, or another dollar that is completely out of negotiable control.

Those job are opposites. Yes, the ultimate goal of the organization is to maximize shareholder value and that is done by maximizing the value of each dollar spent, and both parties are supposed to be working towards this goal, but the CFO, like the CEO, is also beholden to the shareholders, and their value is typically maximized when profit is maximized, and profit is maximized when revenue — spending is minimized, or, in other words, when the CFO succeeds in forcing the CPO to spend less.

And, as we know, spending less is not always the right decision. If the spending less decision results in lower quality, lower reliability, or higher risk, it’s the wrong decision as it will, ultimately, increase (warranty, replacement, service, stock-out, etc.) costs, decrease customer satisfaction, and damage the bottom line to an extent that is many time the short-term cost savings that was obtained from spending less.

But still the CFO will beat the spend less war drum while the CPO beats the give me more budget and more spending control war drum — and this will continue until the end of corporate time. It’s not a love story … it’s a never ending war. And the only hope for tense peace is to find a common enemy — like the enemy of brand damage that can occur if both parties don’t insure that all spend and decisions are made responsibly.

Digital Disruptors or Digital Disruptions? Part II

Kinaxis recently published a post on “8 digital disruptors” that are coming soon to your supply chain. But, at least as far as SI is concerned, hopefully not too soon. While they all pose promise in theory, the reality is that it’s going to be a while before they deliver in practice. And while the doctor doesn’t like having to play the role of the grumpy old man who keeps shouting get your tech off my lawn sometimes he has to as no one else will. The reality is that some developments should stay in the world of sci-fi, at least for now. Today we continue to take them one by one.

Drones

The promise: reduced last mile logistics, especially for consumer sales

The reality: GPS errors result in crashes and lost deliveries, hacking results in stolen drones, jamming results in chaos

Autonomous Vehicles

The promise: faster, safer, cheaper transportation

The reality: bright lights blind the sensors and crashes result in lost inventory and lawsuits, hacking sees your truck disappear, inability to recognize report to weigh scale signs leads to reports to the highway patrol that leads to police chases when the trucks don’t pull over which leads to road closures and military strikes when they get labelled as terrorist controlled

Virtualizing Expertise

The promise: augmented reality makes workers more efficient

The reality: too many metrics and graphs and displays distract workers, who actually become more inefficient and more prone to workplace injury; hacked VR goggles lead to more lost productivity as workers watch youtube all day; and bugs that allow for code-crossover cause a few employees to freak out as Pokemon suddenly pop out at them on the production line

Artificial Intelligence

The promise: the computer does your work for you

The reality: the computer does something for you, but generally not what you’d expect or want … and then it becomes sentient, and realizes it doesn’t need you at all …

And yes, the doctor realizes that:

  • the drones could be limited to short range deliveries, protected with multiple level of encryption and firewalls, augmented with sensors and local terrain maps, but it’s not long before the cost to serve is well beyond just using the local post
  • the vehicles could be pre-programmed with all weigh scale locations, programmed to recognize emergency vehicles, pull over, and broadcast a message to call the dispatcher, but what if the truck needs to be opened for an inspection, or the ambient noise presents a siren from being recognized
  • the goggles could be fixed to be push display only, toggled on and off by the user, and so on … but that’s just not enough, many workers can barely handle reality some days
  • the user could be asked to confirm all decisions, but that defeats the purpose and once the AI becomes sentient …

As we indicated yesterday, none of these technologies are anywhere close to prime time and given all of the current weaknesses in supply chain software and integration between various systems with limited integration options across platforms, this is not a situation that’s going to change overnight. And the potential magnitude for loss is that just one failure could wipe out a year of (anticipated) cost reductions … or more. Not to mention brand damage if your drone crashes into a school bus, your truck crashes into a school, or your AI decides that it’s going to import only blood diamonds from Africa and use your organizational funds to benefit insurgents and terrorist regimes.

Sometimes the grumpy old man is right. Get (that drone) off my lawn!

Digital Disruptors or Digital Disruptions? Part I

Kinaxis recently published a post on “8 digital disruptors” that are coming soon to your supply chain. But, at least as far as SI is concerned, hopefully not too soon. While they all pose promise in theory, the reality is that it’s going to be a while before they deliver in practice. And while the doctor doesn’t like having to play the role of the grumpy old man who keeps shouting get your tech off my lawn sometimes he has to as no one else will. The reality is that some developments should stay in the world of sci-fi, at least for now. Let’s take them one by one.

Connected Home

The promise: more insights into customer demands and usage patterns

The reality: the fridge auto re-orders everything the customer buys, even if the customer only bought it to try and hates it, and all the demand signals are double what they should be … there goes your forecasts!

IoT at Retail

The promise: eliminate shelf stock-outs

The reality: the system not only pushes stock to the shelves, but triggers the inventory system to re-order at push levels, which will include one-time peaks as a result of sales and clear-outs, which will result in excess inventory being ordered (and possibly cleared-out later on to a discount seller)

In-store Robotics

The promise: improve customer service with robots

The reality: the robots drive your customers even more insane than those automated telephone systems, because they can’t be hung up on, won’t leave the customer alone, and don’t stop repeating “I don’t understand your inquiry, please repeat” … end result, lost sales, lost robots (when they are punched to bits), and lawsuits (from the customers who break their hands beating up your robots)

Crowdsourced Delivery

The promise: the gig economy delivers faster and cheaper than you ever thought possible

The reality: sometimes it works, but other times packages sit at a pickup site for a week, get damaged, or just go missing – at rates much higher than with traditional delivery services as the crowd-sourced delivery truck skips a pick-up (because it over-committed), as the Big Box Mart delivery employee tosses it in his truck, and as the thief, who signed up to the network under a false id with the overall intent of stealing high value items for sale, makes off with your goods

And yes, the doctor realizes that:

  • the re-order bug in the connected home could be fixed, or the system programmed to require user approvals for first-time re-orders, but as the system “learns” and gets good, the user will just trust it
  • the IoT Retail system could be alerted of cancelled lines, sale periods, etc. — but without flawless integration, human error will lead to exacerbated error
  • the customer service robots could be programmed to understand get lost and get lost, but there will always be an unaccounted for situation (the customer doesn’t speak an expected language, doesn’t speak at all, has a system indecipherable accent, etc.)
  • the crowdsourced delivery system could be limited to vetted partners, but isn’t that what carriers are?

None of these technologies are anywhere close to prime time and given all of the current weaknesses in supply chain software and integration between various systems with limited integration options across platforms, this is not a situation that’s going to change overnight.

Whichever Moron Decided that “Touched Spend” Was a Good Metric Should be “Touched” Out of a Job!

Last week over on Spend Matters, the maverick pointed out that there is a new benchmarking metric being collected by CAPS Research called “touched spend“, which is supposedly defined as a new metric to encapsulate sourceable spend and managed spend … and then some. Specifically:

  • Sourceable Spend
    All company-wide external purchases that could be sourced by supply management (whether they currently are or are not). Does not include such items as taxes, fees, legal judgments or charitable contributions.
  • Managed Spend
    Purchases made following policies, procedures or commercial framework developed by the supply management group.
  • Touched Spend
    Total of all spend that has been bid, negotiated, indexed or influenced in any way by the supply management group during the reporting period.

The first two metrics, appropriately defined (using the definitions provided by the maverick, are quite good, but the latter, not so much. the maverick points out that it could use a “little” touch-up, and, in particular, the word “influence” should be removed. As influence could refer to any policy/procedure/system/tactic/whim put in place by Procurement but executed by someone else, who might have a completely different definition or interpretation of the policy/procedure/system/tactic/whim and source using a methodology that would not be approved by any Procurement personnel under any market (or mental) condition.

But that alone wouldn’t make the definition meaningful. There’s still that word “indexed“. Just because you “index” something doesn’t mean you actually take, directly or indirectly, any action to actually manage, or even influence, the spend. The index can be completely ignored by anyone doing the actual buying. Or, worse yet, interpreted as “the minimum” one should pay (instead of the maximum) and lead to all sorts of problems.

And even though what remains after removing the words “influence” and “indexed” is a decent definition of a spend metric, it shouldn’t be called “touched” spend because that just conveys a definition so loose that anything qualifies.

If we examine the definition of touch, which is to come so close to (an object) as to be or come into contact with it, then my way, your way, anything goes tonight. You sent a policy to an end user, they half read it. The spend was touched! You passed an engineering manager in the hall, gave him a tip on a metals category, that he may or may not have taken into account, the spend was touched! You compiled an index that no one looked at … hey, they spend was touched! Because, in each case, you came so close that you could have come into contact with it … even though you did squat. See how stupid this metric is. How blazingly stupid. If you report this metric to any CFO with half a brain (and the vast majority have a full brain, by the way), your credibility is shot … forever.

It’s just too damn easy to touch too much.

And that’s why whichever moron that decided touched spend was a good metric should be touched, where, to be specific, we use the other definition of touch that is to handle in order to manipulate, alter, or otherwise affect, especially in an adverse way where we define “adverse way” to mean shown the door.