Category Archives: Supplier Management

(Supplier) Diversity is Dead!

Editor’s Note: This is an extended version of a comment that was made in response to an inquiry by THE REVELATOR on LinkedIn about the progression of supplier diversity.

The simple fact of the matter is thus: diversity threatens fascists who want authoritarian dictatorships. This means that as long as far right wing agenda politicians keep getting elected in first world countries (which has been happening more than not over the last decade), not only is DEI (Diversity, Equity, and Inclusion) not going anywhere, but it is going to be rolled back, and done so faster than most policies that came before in countries which equated diversity progress with measurable outcomes.

The sad reality of the situation is that as soon as the board/chief/president of an organization or governmental department concluded that you were not diverse if you did not have x% of whatever minority the board/chief/president thought you should have x% of by time y, and started equating diversity success with measurable outcomes, we went from a situation where “equal opportunity” was replaced with “minority designated role”. And instead of being a further step in the right direction, it was often a step backwards. Under equal opportunity, if two candidates were roughly equal for a role, the role is to go to the minority candidate. And that’s a good thing. However, under “minority designated role”, non-minorities are banned from consideration, and this is not a good thing if there are no qualified minority candidates available for the role. A senior role that should demand a full University degree (Bachelor’s or higher), a decade of experience, and one or more certifications may end up going to someone who just has a 2 year associates degree, only 3 years of work experience (barely relevant to the role), and no certifications as that is the most qualified person who applied.

What many firms fail to take into account when considering diversity mandates is the number of qualified candidates in the minority who are actually in the vicinity of, and who are then actually interested in, and willing to take on, the position. For example, if you were to demand that half of your coding team need to be women, good luck with that when only 25% of STEM graduates in North America are female. (So if you did get 50%, a lot of other companies wouldn’t get any female hires.) Or if you demand that 1/5th of your workforce be hispanic, to mirror the US population distribution, but it’s an in office job in a major city in an expensive neighbourhood where 95% of the local population is white, good luck with that. You might meet your quota, but you know that the vast majority are not going to be qualified for the role.

And DEI didn’t stop there at some organizations and institutions in North America. As soon as people figured out that a DEI program or a particular minority designation could be used to exclude people of certain religion(s) they didn’t like, it went from a tool of inclusion to a tool of subversive discrimination. (So much for equity and inclusion!) Then came the backlash; the labelling of anything even remotely related to DEI, equal opportunity, or humanity as woke; and a full on assault by the fascists and authoritarians.

More specifically, in countries where they have enough power in the government, the authoritarians are dismantling any and all programs they have control over, barring any third party organizations with such policies from doing business with their government, and doing whatever they can to overturn all DEI and Equal Opportunity legislation they can, as far back as they can.

Moreover, given that these far right wing parties are being well funded by donations from the tech bros who spend more time meddling in global politics than running their own ventures, there are not many options for progression of ANY diversity on the global stage.

You’re Not Doing Supplier Performance Management (SPM) Right Unless it Improves You!

This post was inspired by a LinkedIn post from Celia, founder of Vendor Score IT, who says that if your suppliers aren’t evolving, they’re holding you back.

Celia is perfectly correct in that you will be held back by suppliers who refuse to progress, but another key point that really needs to be addressed that all of the supplier performance management advocates miss is the following:

If you’re not evolving, you’re holding your suppliers back.

When you need to step up performance, you can’t put all of the blame or all of the responsibility on the supplier. You have to take some too. First of all, you selected the supplier. Secondly, you didn’t monitor the supplier closely to ensure that the supplier performed up to your level of expectation. Thirdly, you know what the customer wants, as well as the performance you expect, better than your supplier. Fourthly, you should be leading the innovation charge, as the one responsible for value-add for the end-customer.

Furthermore, when it comes to Supplier Performance Management (SPM), while it’s super easy to just drop the under-performing suppliers and replace them with better performing ones … simply adopting better suppliers doesn’t make you any better as an organization. In fact, not only will you have a new set of suppliers in the lower median who then become under-performing, but overall performance scores will go down because you are not enabling them to perform better.

You don’t want to ditch poor metrics because they are holding you back, vendor reviews to ensure they are striving to get better, or take a growth mindset to make them perform better.

You want to ditch poor metrics because they are forcing suppliers to perform sub-optimally to score well in your system, you want to do “vendor reviews” to open dialogues about how you can help them improve (because, with a three year commitment, they’ll buy a new machine, upgrade their warehouse and use new pallets to reduce breakage, improve quality control processes, etc.), and use your growth to fuel theirs as well.

How do you identify the bad metrics? How do you identify where you are holding them back (vs. them holding you back)? How do ensure that you get the growth you need? By taking the mindset that it’s at least as much your fault as there’s (and probably more), by going in with a joint improvement mindset, by listening to them (and, if necessary, reading between the lines to see how their focus on certain metrics, such as OTD or year-over-year production cost decrease [when energy costs are going up and it’s forcing them to sacrifice quality], is actually degrading their performance), and asking them to contribute to improvement plans. (i.e. You make it clear that you are going to work with them on joint improvement, not just dictate plans to them or expect them to do all the work. And that they should take advantage of that because, otherwise, you’ll find another supplier who will work with you if they won’t. A good supplier will jump at this opportunity.)

By improving your organizational performance, you will encourage your suppliers to improve their performance as well!

Is this FINALLY the time of Specialized Supplier Discovery?

Supplier Discovery applications are not new. They’ve been around for quite some time. Two notable examples that you might not think of as Supplier Discovery are Tealbook and ScoutBee as Tealbook is now focussed on powering your procurement with trusted supplier data and Scoutbee X is now the AI-powered procurement network. Why? Because no one actually bought supplier discovery!

Why? Business have always thought they know their suppliers, they know who their suppliers’ competitors are, and that if they need to find a supplier, for the last 25 years, that’s what Google was for. And they kind of did. If they were sourcing from China, they knew all the major competitors in China. From South Korea or Japan, the same. If they were sourcing regionally in Asia, they knew enough. And if they didn’t, Google. They might miss one or two of the top 10, but if you knew 80% of the suppliers you might do business with, constructed a good RFP, vetted properly, you usually acquired a decent product at a decent price and went on merrily about your day, especially if you saved 2% on a category in the last RFP.

But that was a time of relatively free global trade. Yes there were tariffs, and yes they changed from year to year, but for any given trading partner pairing of countries, they were relatively static and predictable. With the exception of a country like Brazil that, for a while, was changing tariffs weekly, you knew how to compute your TLC (Total Landed Cost), where you wanted to do business, how to find the majority of suppliers, qualify them, and do business with them.

Plus, there were few countries with sanctions that affected you, and you didn’t have one of the major global economies cut off to you if you want to do business in the EU. Moreover, no matter where you did business, you did business in dollars if you wanted to. That’s because, for most countries, currency exchange rates were more or less stable for a period of time and easily predictable.

However, those good times in global trade are gone. Long gone. Not only did you have to deal with countries shutting down completely during COVID, but then you had to deal with sanctions against Russia, canal slowdowns and effective closures due to Panamanian droughts and Houthis in the red sea, dynamic exchange rates as a result of recent elections, and now rampant trade wars.

Your supply chain is in shambles, and, frankly, there is a portion of your current supply base that, even if it is still available, you can’t afford to use anymore. That’s because 25%+ tariffs in some category are just too crippling. So you need to find new suppliers, preferably at home, but most of the time that won’t be possible (as you were outsourcing because there wasn’t enough [competitive] capacity in your own country), so you at least need to find suppliers in a low cost, low tariff country — and likely one you haven’t done a lot of, or any, business in before.

And you need to find these new suppliers, and send them RFPs, fast. You should have done it yesterday. But you need to be 98% sure these suppliers can actually serve you before even sending the RFP because you don’t have time to wait for a response, review the RFP, and then realize they can’t do what you need and that you have to find another set of suppliers and repeat.

But you can only do this if you not only have deep data on what they make, but what equipment they have, processes they support, capacities they can meet, their tier 1 supply chain they have immediate access to, and so on. Some of this might be on their website, if they have one, in a language you don’t read, and a format you’re not used to.

In short, you don’t have the information you need, you can’t get it quickly, and that means identifying your next supplier is going to take months — months you don’t have — unless, of course, you use a Supplier Discovery platform that has all of the information on the global supply base you need to make this decision. That has the majority of suppliers in an industry. That has deep data on their products, capacities, equipment, processes, and factory locations. That can take in detailed requirements and/or a detailed BoM with production requirements and instantly identify 10 suppliers not in a set of regions that will meet your need. That will help you analyze appropriateness, cost differentials, and suitability to your business before your first contact. That has the contact information you need to make the right contact.

In other words, you need Supplier Discovery, and maybe even a market research platform like Forestreet, more than you ever did, there are platforms out there (a few old, a few new) that can help you, but will you wake up to the fact and finally incorporate these tools into your Procurement platform? (And let’s be clear, no matter what they tell you, Suites are NOT Enough.)

Myth-busting 2025 2015 Procurement Predictions and Trends! Part 4

Introduction

In our first instalment, we noted that the ambitious started pumping out 2025 prediction and trend articles in late November / early December, wanting to be ahead of the pack, even though there is rarely much value in these articles. First of all, and we say this with 25 years of experience in this space, the more they proclaim things will change … Secondly, the predictions all revolve around the same topics we’ve been talking about for almost two decades. In fact, if you dug up a Procurement predictions article for 2015, there’s a good chance 9 of the top 10 topic areas would be the same. (And see the links in our first article for two “future” series with about 3 dozen trends that are more or less as relevant now as they were then.)

In our last instalment, we continued our review of the 10 core predictions (and variants) that came out of our initial review of 71 “predictions” and “trends” across the first eight articles we found, in an effort to demonstrate that most of these aren’t ground-shattering, new, or, if they actually are, not going to happen because the more they proclaim things will change …

In this instalment, we’re again continuing to work our way up the list from the bottom to the top and continuing with “supplier management”.

Supplier Management

There were 6 predictions across the eight articles which basically revolved around “collaboration” with some focus on “development”. This is yet another topic that is overhyped and needs to be addressed, but, as with our last two articles, we will start by listing all of the individual predictions:

  • Agile Supplier Management
  • Collaborative Platforms
  • Enhanced Supplier Collaboration
  • Enhanced Supplier Collaboration
  • Supplier Collaboration and Strategic Partnerships
  • Supplier Development and Growth

Here’s the thing. For anything not a commodity, an organization’s success ultimately depends on supplier performance. While supplier performance will be good from the start for some suppliers, it won’t be so good for others. In these cases, it won’t always improve just be rejecting shipments. Sometimes it will require collaboration, which means that collaboration has always been, and will always be, important. So it’s nothing new. The only difference is that, as disruptions become more common, products require more differentiation and rapid advancement, and supply chains need to rapidly shift as raw material sources and distribution routes become unavailable, we are in a situation where collaboration is becoming increasingly more critical.

As a result, collaboration will increase in some supply chains as it is needed, but you won’t see a sudden shift en masse for Procurement to all of a sudden become more collaborative with its suppliers unless it needs to. While there is always a lot of talk about how collaborative an organization is, especially at RFP time, the reality is, as we all know, once the contract is inked, unless the supplier is considered very strategic, the chance of actual collaboration is very low.

The best one can hope for is that the organization selects supplier management software that enables better communication and collaboration than is usually supported by such software, which will mean that, over time, collaboration may increase before a disaster scenario that requires it to do so.

The only prediction that may become true in a small number of Procurement organizations that install more modern, collaborative, agile platforms is they become more agile in supplier management, begin collaboration when potential issues are detected, see how easy it is, and actually start supplier development before major problems arise.

What Should Happen? (But Won’t!)

Organizations should acquire supplier performance management and development systems that allow them to track supplier performance, identify blips and downward trends, and immediately identity, and implement, appropriate supplier development programs … in a collaborative fashion with the suppliers. This will identify which suppliers need more collaboration, when, and help you get to the why. That’s it. It’s not giving collaboration lip service, looking for “agile” systems, creating new “partnerships”, etc. It’s just identifying which suppliers need collaboration, when, why, how, and getting it done … with straight-forward supplier performance management and development systems.

Three down, seven to go.

Advanced Supplier Management TOMORROW — No Gen-AI Needed!

Back in late 2018 and early 2019, before the GENizah Artificial Idiocy craze began, the doctor did a sequence of AI Series (totalling 22 articles) on Spend Matters on AI in X Today, Tomorrow, and The Day After Tomorrow for Procurement, Sourcing, Sourcing Optimization, Supplier Discovery, and Supplier Management. All of which was implemented, about to be implemented, capable of being implemented, and most definitely not doable with, Gen-AI.

To make it abundantly clear that you don’t need Gen-AI for any advanced back-office (fin)tech, and that, in fact, you should never even consider it for advanced tech in these categories (because it cannot reason, cannot guarantee consistency, and confidence on the quality of its outputs can’t even measured), we’re going to talk about all the advanced features enabled by Assisted and Augmented Intelligence that are (or soon will be) in development (now) and you will see in leading best of breed platforms over the next few years.

Unlike prior series, we’re identifying the sound, ML/AI technologies that are, or can, be used to implement the advanced capabilities that are currently emerging, and will soon be found, in Source to Pay technologies that are truly AI-enhanced. (Which, FYI, may not match one-to-one with what the doctor chronicled five years ago because, like time, tech marches on.)

Today we continue with AI-Enhanced Supplier Management that is in development “today” (and expected to be in development by now when the first series was penned five years ago) and will soon be a staple in best of breed platforms. (This article sort of corresponds with AI in Supplier Management The Day After Tomorrow that was published in May, 2019 on Spend Matters.)

TOMORROW

Supplier Future State Predictions

Supplier management platforms of today can integrate market intelligence with community intelligence, internal data, and external data sources and give you a great insight into a supplier’s current state from a holistic perspective.

Along each dimension, future states can be predicted based on trends. But single trends don’t tell the whole story. Now that we have decades of data on a huge number of companies available on the internet across financial, sustainability, workforce, production, and other dimensions which can be analyzed overtime and cross-correlated, we can do more, and know more.

Based on this correlated data, machine learning can be used to build functions by industry and company size that can predict future state with high confidence based upon the presence of a sufficient number of sufficiently accurate data points for a company in question. Now that these platforms can monitor enough internal, community, and market data and pull in a plethora of data feeds, they can accurately compute metrics with high confidence along a host of dimension, and this in turn allows them to compute the metrics that are needed to predict future state if the vendor’s platform has enough historical data on enough companies to define trends and define predictor functions using machine learning.

Not only can you enter a relationship based on a current risk profile, but on a likely future risk profile based on what the company could look like at the end of the desired contract term. If you want a five year relationship, maybe taking advantage of that great deal due to a temporary blip in supplier or market performance may not be a good idea if suppliers historically in this situation typically went into a downward spiral after accepting a big contract they ultimately weren’t prepared to deliver on.

Category Based Supplier Rebalancing

We could actually do this today, as a few vendors are now offering this capability, but it’s not yet part of supplier management platforms and the newly emergent offerings are often limited to a few categories today. But tomorrow’s platforms will continually analyze your categories holistically (along the most relevant dimensions, which could include cost, supply assurance, environmental friendliness, etc.) to determine if the supply mix you are currently using is the best one, let you know if there could be a better one, and suggest changes to orders (as long as it doesn’t jeopardize contracts where that jeopardy could come with a financial or legal penalty).

It’s just a matter of re-running an optimization model on, say, a monthly basis with updated data on price, supply assurance, and environmental friendliness (using the appropriate data for each, such as market quotes, current supplier risk, carbon per unit, etc), and comparing the optimal result to the current allocation plan. If it’s within tolerance, stay on track; if it’s slightly out of tolerance, notify a human to conduct and review a thorough analysis to see if something might need to change; if it’s way off of tolerance, recommend a change with the data that supports the change.

Supply Base Rebalancing

Once you have a platform that is continually reanalyzing categories and supplier-based assignment, you can start looking across the supply base and identify suppliers which are hardly used (and an overall drain on your company when you consider the costs of maintaining a relationship and even maintaining the supplier profile) and supplier that are potentially overused (and pose a risk to your business simply based on the level of supply [as even the biggest company can stumble, fall, and crash to the ground on a single unexpected event, such as the unexpected installation of a spreadsheet driven Master of Business Annihilation as CEO who has no clue what the business does or how to run it effectively and, thus, causes a major stumble, as summarized in Jason Premo’s article).

And, more importantly, identify new suppliers who have been performing great with slowly increasing product / service loads and should be awarded more of the business over older suppliers that are becoming less innovative and more risky to the operation at large. Now, this will just be from a supply perspective, and not a supply chain perspective (as these programs focus on suppliers and not logistics or warehousing or overall global supply issues), but this will be very valuable information for Sourcing and New Product Development who want to always find the best suppliers for a new product or service requirement.

Real-Time Order Rebalancing

Since tomorrow’s platforms will be able to recommend category rebalancing across suppliers, they will also be able to quickly recommend real-time order rebalancing strategies if a primary supplier is predicted to be late in a delivery (or a human indicates an ETA for a shipment has been delayed by 60 days). This is because they will be integrated with current contracts, e-procurement systems, and have a bevy of data on projected availability and real historical performance. Thus, it will be relatively simple to recommend the best alternatives by simply re-running the machine learning and optimization models with the problematic supplier taken out of the picture.

Carbon-Based Rebalancing

Similarly, with the rise of carbon-calculators and third-party public sources on average carbon production per plant, and even unit of a product, it will be relatively easy for these supplier management platforms to build up carbon profiles per supplier, the amount of that carbon the company is responsible for, how those profiles compare to other profiles, and what the primary reasons for the differentiation are.

The company can then focus on suppliers using, or moving to, more environmentally friendly production methods, optimize logistics networks, and proactive rebalancing of awards among supplier plants to make sure the plants producing a product are the ones closest to where the product will be shipped and consumed. It’s simply a carbon focussed model vs. a price focussed one.

SUMMARY

Now, we realize some of these descriptions are dense, but that’s because our primary goal is to demonstrate that one can use the more advanced ML technologies that already exist, harmonized with market and corporate data, to create even smarter Supplier Management applications than most people (and last generation suites) realize, without any need (or use) for Gen-AI. More importantly, the organization will be able to rely on these applications to reduce time, tactical data processing, spend, and risk while increasing overall organizational and supplier performance 100% of the time, as the platform will never take an action or make a recommendation that doesn’t conform to the parameters and restrictions placed upon it. It just requires smart vendors who hire very smart people who use their human intelligence (HI!) to full potential to create brilliant Supplier Management applications that buyers can rely on with confidence no matter what category or organization size, always knowing that the application will know when a human has to be involved, and why!