Category Archives: rants

Maybe Self Driving Cars Are Inevitable …

… but so is wrong way driving (as happened in Pittsburgh) as online maps are not error free …

… and crashes into the side of a bus (like Google’s Lexus) …

… and crashes into the sides of small trucks (when the autonomous taxi decided to crash into a truck) …

… and even autonomous vehicular manslaughter (when a Model S decided to crash into a tractor trailer) …

There’s a reason that LOLCats avoid all self-driving cars (and not just chryslers that will drive you off the road) … and that’s because they knew just where self-driving cars would take them … and they only have nine lives.

They are quite happy to listen to great grandpa LOLCat who said ride a bike/

Always Remember That While the Second Mouse Gets the Cheese …

… the third mouse gets nothing — unless you count the opportunity to bury the first mouse in a shallow grave before he dies of starvation something.

As Pete Loughlin reminds us in his recent post, “when conventional wisdom goes wrong”, most enterprises make one of two mistakes when selecting enterprise technology. Either they go with the same-old, same-old incumbent technology (that never solved their problem in the first place), or they go with a bleeding edge start-up (because their eagerness to please can be exploited). For the vast majority of companies, neither solves the problem.

While many startups will have something new and innovative, most don’t have the breadth or depth required to support a large organization — even if that is their ultimate target market. Start-ups are good for (smaller) mid-size organizations that need a point solution, or large organizations that just need one thing done better — they are not good as platforms. Similarly, if your ERP has failed you for 10 years, starting yet another customization project with a big 8 consultancy that has yet to deliver what they promised on any project isn’t a good idea either.

The best solution for many organizations is typically a new vendor with a newer, or more appropriate, solution, but not one that is so new that it has not yet been around long enough to be adequately stress tested and proven to have the breadth and depth required for the organizational size and need. A (smaller) mid-size organization should already be using it successfully and it should be clear that the solution has enough scale-power.

It’s often a hard call, but that’s why impartial expert technology consultants — who do not (re)sell solutions* — should be engaged. In particular, they should be engaged to help an organization identify the processes it needs to support, the key functionality that a platform needs to offer (but not features, as sometimes multiple feature sets can solve the same problem), the scale the platform will need to support, the data that will be required, the integrations to other enterprise systems or external data sources to fetch this data, and the breadth of deployment that will be required to support the processes. Then, they should help the organization construct a proper RFP (that describes the current process, the problems, the desired process, and ultimate goals) and identify potential vendors to send the RFP too, as well as demo requirements, scoring and weighting systems, and best practices in vendor selection. But they should not sell, or have any interest in, any of the solutions — they are guides through the dangerous enterprise jungle, not treasure map peddlers.

And, most importantly, as Pete points out, if the expert is engaged, she should be listened to. Otherwise, the organization is not only wasting money on the executive’s gut-feel technology platform, but also on the advice that was going to be ignored anyway. Always remember, there’s no gold in them thar hills, but there is in the advice of a wise sage.

just a reminder that the doctor does not have any interest in, or receive any compensation for, any technology that he may or may not recommend, unlike many analyst firms that charge per lead and per sale

Is Bad Procurement Responsible for the Proliferation of Snake Oil?

Once upon a time in China, medicine was based on ingredients found in nature. One such ingredient was snake oil (from a water snake) that was used to treat joint pain (which we now call arthritis and bursitis) because it gave relief when rubbed on the skin at a painful site. This is because real snake oil contained a lot of omega-e fatty acids which not only reduce pain but also reduce inflammation. While not necessarily a powerful medicine, it is a medicine nonetheless.

When the Chinese worked on the first transcontinental railroad (in the US), they introduced this medicine to fellow workers (which included native and working class Americans) who had never had such a medicine. They were, naturally, impressed by it … as were salesmen looking to make a quick buck with this “miraculous pain cure” which, at a time when western medicine was relatively weak, was desired by the population at large. So, long before the creation of the FDA (1906) when anyone could sell anything they wanted, these salesmen created fake snake oils (which often didn’t contain any oils from snakes) that they hawked as “cure-alls”. These roaming charletans, who often paid assistants (who would travel separately, act sick and injured, take the cure-all, and immediately exclaim cure), did well, until people who bought the tonics realized they din’t work. But by then they were on to the next town.

However, people did travel and eventually realized that all these salesmen and untrained / unlicensed doctors were, as we still say today, quacks (which is short for the Dutch quacksalver who would use home remedies to “cure” everything, whether there was any real basis for the cure or not), and gave a name to these cheaters and the product they sold. Because the first cure-all tonics were called “snake-oil”, any medicine with a ridiculous claim was “snake oil” and any peddler of such a ware was a “snake-oil salesmen”. However, these salesmen and products are not restricted to the consumer world, and soon those claiming to have the ultimate solution to all of a business’ process, sales, or cash management problems, etc. were deemed snake oil salesmen, selling processes or products that didn’t work. And we still have these salesmen today, often pitching great investment opportunities (especially in high tech, which we call silicon snake oil) that don’t really exist.

But to make matters worse, we don’t just have snake oil salesmen to deal with, we have snakes in our business (which the snake-oil salesmen claim they can deal with, but we’ll get back to that). What kind of snakes? KPI snakes. As the procurement dynamo explains over on procurement.world, most enterprises are chock-full of Cobra KPIs.

Why Cobra KPIs? Blame the British for that and their folly of offering a bounty for every dead snake the locals brought them in 19th-century Delhi. If you were an enterprising, but struggling, vaishya, and you received rupees for every dead snake, and the British were handing over rupees by the snake, you’re going to want to get your hands on as many snakes as possible. What’s the easiest way to do that? Breed them in droves, and kill them in droves.

As the British discovered, Cobra KPIs are those that eventually rise up, strike, and inject you full of poisonous venom. All the British got for their efforts were drained coffers and more live snakes then they wanted (when the merchants released them all on the streets when the bounty was cancelled). And if your organization has Cobra KPIs, all it will get for its efforts is loss — lost time, lost money, and lost opportunity.

Organizations, including Procurement organizations, are chock-full of these Cobra KPIs. Like FTE per dollar of spend, supplier count per category/region, p-card spend per total spend, sourced spend over total spend, etc. (Why? It’s not how much is spent on Procurement resources, it’s the value they generate. It’s not how many suppliers, it’s the right number of suppliers, which varies by product, region, and numerous other factors. It’s not how the bills are paid, it’s whether or not the bills are for the right stuff. And sometimes it’s best to renegotiate with incumbents and seek out value-add innovation versus unrealizable or unsustainable year-over-year cost reductions.)

But even worse, because organizations are sometimes too obsessed with KPIs, they overload themselves with overly intensive tracking, scorecarding, and reporting initiatives that take time away from value-generating sourcing activities. And then they decided they need a solution to automate this or reduce the stress. So they go to market. And who responds? Snake-oil consultants who offer their next generation tracking, scorecarding, and reporting platforms that, for a “very reasonable” one-time set-up fee (in the tens or hundreds of thousands, depending on how big the organization is and what they think they can get), and an ongoing “expensable” license and maintenance fee that just fits under the P-card limit on a monthly basis, the organization will be provided with an automated system that will do all the data collection, normalization, integration, scorecard generation, trending, and reporting the organization needs. And if needs change, changes can be made for a “modest” daily consulting fee (of only a few thousand a day). It’s the KPI cure-all! And it’s snake oil. Snake oil that the organization proliferates by defining too many KPIs, which always contain too many wrong KPIs, that entail too much work that needs to be automated.

In other words, don’t define KPIs needlessly. And don’t define any until you not only understand what the goal of the KPI is, but how the KPI will help the organization achieve that goal. (With reference to our examples above, it’s ROI per FTE above a threshold, it’s a supplier range for each product-region pairing determined by way of stakeholder collaboration and analysis, p-card spend under management above a threshold, and spend under management — where spend under management is any spend where a conscientious decision was made to tackle the spend that way after an analysis. Now, the ROI calculation will have to carefully thought out and reviewed regularly, the supplier ranges revisited regularly, and the threshold reviewed to make sure it doesn’t trigger a red light on emergency spend, but at least these metrics are designed with a value focus in mind.)

(And if you’re not careful, you might end up with real snakes! Just ask the airline industry, that, just two days ago, made Samuel L. Jackson’s nightmare of motherf*ckin’ snakes on the motherf*ckin’ plane a reality for some passengers of the Air Mexico Torreon-Mexico City flight! [One Source!] If you have too many useless KPIs, as Douglas Adams tried to warn us years ago [as you can wait forever for lemon-soaked paper napkins and never get enough], the attendants will be too busy running through time-wasting checklists rather than making sure that only authorized, paying, passengers are in the cabin!)

 

It’s 2016! Welcome Back to the Industrial Age of SRM!

State of Flux just released their 8th annual supplier relationship management research report entitled Digital SRM: Supplier Relationships in the New Technology Landscape and while it reveals the handful of leading supply chain organizations are, or are moving towards, digitization, it reveals the majority of organizations are not only stuck in the past, but moving back towards the industrial age in their supplier (relationship) management processes. Scary!

So scary in fact, that I hope that the purchasing wizard Pete Loughlin of Purchasing Insight does a follow up to his piece on how “we are now arriving in the digital economy – turn your watch back 40 years” entitled we are moving forward in the digital economy, turn your watch back another 40 years because some of the practices many global organizations are still practicing with respect to supplier relationship management could literally be straight out of Marshall Monroe Kirkman’s classic The handling of railway supplies. Their purchase and disposition.

And I’m not joking.

Many organizations are still doing nothing more than inviting bids by public advertisement for a year’s supply and taking the advice that the pulse of the market should be continually felt and, clearly, not thinking about the importance of managing relationships after the purchase order is cut.

And while it looked like we are making progress last year, the simple facts that:

  • the number of businesses failing to invest in any SRM-related training rose from 26% in 2015 to 39% in 2016
  • 80% of companies are not achieving on-going benefits from external spending (compared to what they could be)
  • 87% of companies are still using Excel (which is essentially just an electronic version of a general ledger at most companies) as their primary SRM tool

demonstrate that, for the majority of organizations, the digital age (which for the consumer has been here for almost two decades) is still decades away.

After all, why are Purchasing Manages still panicing when they receive the 2:00 am phone call from the CFO informing them that their primary supplier in China just filed for bankruptcy and the company needs to know ASAP what the impact will be. If they had modern supplier relationship management systems, it wouldn’t take them 48 sleepless hours pouring through accounting systems, ERP systems, and spreadsheets to figure out what products come from the supplier. With modern supply management best practices it wouldn’t take them weeks to identify a new supplier and months to switch. And with good supplier relations, they definitely wouldn’t have to absorb the price doubling mandated by the receivership for continued supply of the critical product lines.

With proper supplier relationship management, you know as much about the (financial) health status of your strategic supplier as you know about your own organization. With proper supplier relationship management, you know all the products that are being provided, in what volume, in what consumer product lines they are being used, and what the impact of a stockout or termination of the line will be. With proper supplier relationship management, a company knows which other suppliers it is using that could also produce the product, how long it would take to switch, and how much it would cost. And with good relations, the last thing the supplier personnel would be comfortable with is charging their best customers an unexpected, possibly contract violating, unmitigated price increase, and would fight any suggestions by the receivership management to increase prices to any degree.

And the sad thing is there is no shortage of basic SRM systems these days. Not all are industry leading like (and not all will deliver anywhere near the value of) State of Flux’s Statess solution, but there are so many ways for an organization to enter the digital age that it’s shocking just how hard they fight to stay in the industrial age.

Hopefully, now that the results have been demonstrated for eight years in a row, they’ll finally accept SRM is not a passing fad, its the foundation for a new reality, buy in, and go for it. At the very least, hopefully they’ll check out “Digital SRM: Supplier Relationships in the New Technology Landscape” and realize what could be.

Just What Does Modern Sourcing Need?

Every year vendors, analysts, and even bloggers come up with their view of what next generation sourcing is, and what is going to get us there. This year, there is a big push towards AI (Artificial Intelligence) and not just predictive, but prescriptive analytics. Apparently, the Sourcing (and Procurement) of the future will be managed by computers, and not by experts. This is not only unnecessary, but a bit scary.

Why is it scary? Because computers run on algorithms and algorithms are not intelligence. Even though it’s theoretically possible for a sufficiently powerful computing platform to pass the Turing test*, all it does is point out the insufficiency of the Turing test for assessing the intelligence of a computer program. While computers can process significantly more data than we can, and modern predictive (trend) models, given enough data, can be more accurate than our intuition, they cannot detect when they are likely to fail or there is information or factors that need to be considered not baked into the model.

For example, if the prescriptive analytics relies on predictive analytics that relies on price trend modelling that simply takes into account price history, currency fluctuations, demand for related products or commodities, and demand for commodities that are usually used to hedge against price fluctuations in the product or commodity category, it will not detect when a natural disaster will result in a supply chain disruption that will result in less product or commodity availability in two months, which, of course, will have a drastic impact on price. As a result, the recommendation to spot-buy while the price is dropping is the wrong one, because as soon as supply drops, prices will skyrocket and it will be too late to lock in the current price.

But this isn’t the worst that can happen. If the AI that monitors multiple pricing trends, expiring contracts, and supplier performance not only ignores this blip but, instead, not only directs a resourcing for an expiring contract on an unrelated,but highly strategic, category, but encourages the inclusion of a supplier (that normally does not supply that category) that is currently in financial distress, the organization could end up blindly awarding a critical category (that is currently being served by a stable, reliable, reasonably low cost supplier) to a different supplier that is about to go bankrupt and then, seemingly without warning, stock-out on a critical product for months.

As you can probably guess, the doctor still believes that Sourcing and Procurement do not need AI and prescriptive analytics. What they really need are powerful and modifiable rules-based workflows, exception monitoring, suspicious transaction identification, and event monitoring.

The true power of a platform is to automate the tactical and streamline the strategic. Every minute of a professional’s time should be spent on strategic activities or issue resolution, not electronic paper pushing. Document matching, data collection and verification, contract monitoring, automated trend computation, etc. are all tasks that should be done automatically, but no actions with any strategic impact should be taken without intelligent human intervention.

A good rules-based workflow can allow tactical tasks, such as invoice matching and marketing monitoring, to be automated according to accepted rules and ensures that professionals only need to be involved when the parameters exceed the specified norms. Exception monitoring can insure that when something is out of expected norms, or exceeds ranges, or happens too often, it is immediately brought to the attention of the right individual. A suspicious transaction monitoring system, even if statistically based, minimizes the chances of duplicate payments, fraud, audit trail tampering, and so on. And event monitoring, even though it will produce a number of false positives, will enable a human to identify events that might impact the projected supply and cost trends for commodities and products purchased by the organization, and mark those for manual review and, possibly, re-sourcing if need be.

Modern sourcing does need better technology, but it doesn’t need artificial intelligence. It needs platforms that can help the sourcing professional focus appropriately, not guide the professional down a programmed path that will only give Sourcing and Procurement a false sense of security. The solution can track best practices for different situations, but the human still needs to determine if the system’s assessment is proper. Sourcing needs a system that empowers it with the intelligence it needs to make the right decisions, not a system that makes decisions and acts on those decisions (with automated contracts, orders, etc.) without human review and approval.

* A computer that is capable of sampling all conversations archived and currently taking place in real time, finding the one that best matches the conversation you are having, and providing that answer will provide a conversation indistinguishable from that provided from a real human, but it’s not intelligent. It merely proves the infinite monkey theorem.