Category Archives: Supply Chain

The More Things Change …

… the more they stay the same … and the more relevant the past, and the education of, becomes.

Ten years ago today, the doctor asked are you doing it wrong?

Ten years later, the question is just as valid now as it was then. Because if you were doing it right, your supply chains wouldn’t be in such disarray.

Ten years ago we noted that, if you’ve been following the media, you know that we have reached a point were most major business publications are now putting focus on Supply Chain as your top risk and your top opportunity and that they have been preaching the following solutions to not only tame the risk but increase the opportunity.

1. Comprehensive Category Management

Nothing has changed here. One consulting firm is literally sending the same email newsletters they were sending a decade ago on the topic because it’s still relevant, and most firms are still doing it wrong.

As the doctor noted a decade ago, spot buying individual categories at market lows or evening running reverse auctions at opportune times is not category management, not in the least — nor is running your buys through a “magic” or “delightful” intake-to-procure platform (better called “faketake” as a colleague of mine will point out). As was said before, Category Management isn’t just about grouping all seemingly related items and running an event, it’s grouping items that have related characteristics that allow the items to be sourced effectively under the same strategy — which could even be early renegotiation with an incumbent who might give you a great deal to keep you from going back to market. It’s taking a holistic strategic approach, not just mapping to UNSPSC or some out-of-the-box 2-level taxonomy and running with it. And not doing it is what’s resulting in stock-outs and cost-overruns. Because now, it’s not just price, it’s quality and supply assurance. Especially supply assurance. Which brings us to …

2. Supply Chain Risk Monitoring

Not much has changed here, even though the technology now exists for it to change at the majority of multi-national companies. A decade ago, we noted that natural and man-made disasters devastate supply chains when they result in raw material or product unavailability for weeks or months. When a company doesn’t understand their dependence on a single source or the risks that single source is subject too, they can figuratively get caught with their pants down to say the least. Still holds true today.

A month ago we also noted that most leading companies in the Risk Management arena are now tracking and monitoring their tier 1 supply base for not only missed deliveries, but late shipment dates and inquiring immediately when something is late shipping. However, by the time a shipment is late, it’s often too late to go to another source if the reason for the lateness is the lack of an important raw material. Multi-tier monitoring is key, but most Procurement departments are only now exploring supplier risk management in their supplier management module / application, which is tier 1 — even though we now have a number of great solutions that can monitor to at least tier 3, if not down to the source of each raw material in your supply chain. Considering that any good supplier information management solution will allow you to push in risk, compliance, performance, and visibility data, there’s no reason not to be monitoring your critical supply chains. Especially now that we can easily handle:

3. Big Data

What used to be the biggest buzzword-du-jour (before all this useless Gen-AI, desired only by Dr. Evil himself), Big Data is still desirable, but only to the extent you actually have valid, verified, data. Considering that the algorithms that actually work predict demand, acquisition cost, projected sales, etc. based on trends — unverified non-demand, cost, price data (for the wrong product) is NOT going to be of any help.

Get a real data analysis tool, validate the data at your disposal, and use it to your advantage, no more, no less.

Supply Chain Resilience is Becoming Key, but You Can Only Reach it By Design!

But while it used to be a relatively straightforward Supply Chain Network Design problem (especially if you had a good SCND tool with optimization and simulation capability), it’s become a lot more complicated.

A recent article over on Logistics Viewpoint on Resilience by Design: The Power of Simulation in Supply Chain Strategy did a great job of explaining the power and importance of optimization in supply chain network design (and demand fulfillment modelling), especially around optimizing cost between two potential fulfillment options (determined to be equally viable).

These days, you have to consider:

  • the reliability of the supplier (financial viability, raw material availability to it, geopolitical instability, etc.
  • the reliability and availability of the carriers (financial viability, available containers, route viability, etc.)
  • the carbon contribution of the fulfillment model (is it going to make targets today AND tomorrow)
  • … and how your supply chain will adapt if a supplier or carrier fails or a primary product becomes unavailable and you have to switch to a secondary product

That’s true resilience … not just managing costs under demand shifts, but managing availability under supply shifts — in the supplier, carrier, or product.

It’s a tall order, and not all platforms in our space can handle it (well beyond standard SSDO), but a few can. From a network management viewpoint, you can check out Logility Network Optimization (formerly Logility Starboard) and Coupa with their SSDO and SCNO solutions.

The reality is that it doesn’t matter how great of a deal you inked if you can’t actually acquire the products at the agreed upon prices, and, more importantly, if you can’t even get the products at all! So if you want a resilient supply chain, you need to design for it. And sometimes that goes beyond just doing the standard 80/20 or 50/30/20 splits (because if all the suppliers are in the same fault zone on the ring of fire … it will only take one disaster for them all to burn).

Another Supply Chain Misconception That Should Be Cleared Up Now

Yesterday we discussed one supply chain misconception that should be cleared up now because, despite all of the misconceptions mentioned in an Inbound Logistics Article, it was not addressed. However, there is a second misconception that is almost as critical that was not addressed either, so today we will address it. And while, there are, dozens of common misconceptions (including the 22+ mentioned in the article), these are the two that are the most critical to understand, as they are two that pose the most risk in most of today’s Procurement organizations.

 

THE SECOND BIGGEST SUPPLY CHAIN MISCONCEPTION

Supply Chains Have Reached (A New) Normal

Supply chains have never been, and will never be, normal as they will always be in flux due to perturbations, delays, and disruptions that happen daily. You may not see all the trial and tribulations a third tier supplier goes through every day, but trust the doctor when he says they have just as much turmoil as you do. Nothing is predictable in supply chains. When you accept this misconception in conjunction with the first misconception, it’s easy to see how almost all of the others are also misconceptions (that highlight slices of the bigger misconceptions).

For example:

  • cost becomes much less important than supply assurance due to the unpredictable nature of supply chains
  • since it’s not a linear, closed, model, zero-sum doesn’t apply
  • we made up the stages of planning, buying, transportation, and warehousing silos to fit a theoretical definition of normal that doesn’t exist
  • there is at least a hand-off at every stage, so the process is not disconnected but linked, if not intertwined
  • etc. etc. etc.

When you accept the reality, Supply Chain Management, as well as Source-to-Pay, will become a lot easier to manage because you will realize that

  1. only human expertise can adapt to new situations and find real-world solutions to the new challenges that arise
  2. technology will allow you to automate the tactical / semi-normal operations and instead focus on the exceptions and challenges, making you more productive as you focus the majority of your effort on strategy and thinking vs (e-) paper pushing and thunking which is the only thing the machine is good at (and, based on current technological understanding, ever be good at — which is exactly why we can limit it to the thunking because it can do over 3 Billion calculations a second flawlessly [if we ditch the “AI”] while we struggle to do 3)

In other words, only intelligent, adaptable, humans can manage constantly changing supply chains. Good technology can alert them and give them the intelligence they need to make good decisions, but technology cannot make those decisions for them.

(And the doctor, who dreaded saying Bye, Bye to Monochrome UIs can’t wait for the day he can say bye, bye Gen-AI.)

One Supply Chain Misconception That Should Be Cleared Up Now

Not that long ago, Inbound Logistics ran a similarly titled article that quoted a large number of CXOs that made some really good observations on common misconceptions that included, and are not necessarily limited to (and you should check out the article in full as a number of the respondents made some very good points on the observations):

The misconceptions included statements that supply chains should:

  • reduce cost and/or track the most important metric of cost savings
  • accept negotiations as a zero-sum game
  • model supply chains as linear (progression from raw materials to finished goods)
  • … and made up of planning, buying, transportation, and warehousing silos
  • … and each step is independent of the one that proceeds and follows
  • accept they will continue to be male dominated
  • become more resilient by shifting production out of countries to friendly countries
  • expect major delays in transportation
  • … even though traditional networks are the best, even for last-mile delivery
  • accept truck driver shortage as a systemic issue
  • accept the blame when anything in them goes wrong
  • only involve supply chain experts
  • run on complex / resource intensive processes
  • … and only be optimal in big companies
  • … which can be optimized one aspect at a time
  • press pause on innovation or redesign or growth in a down market
  • be unique to a company and pose unique challenges only to that company
  • not be sustainable as that is still cost-prohibitive
  • see disruption as an aberration
  • return to (the new) normal
  • use technology to fix everything
  • digitalize as people will become less important with increasing automation and AI in the supply chain

And these are all very good points, as these are all common misconceptions that the doctor hears too much (and if you go through enough of the Sourcing Innovation archives, it should become clear as to why), but not the biggest, although the last one gets pretty close.

 

THE BIGGEST SUPPLY CHAIN MISCONCEPTION

We Can Use Technology to Do That!

the doctor DOES NOT care what “THAT” is, you cannot use technology to do “THAT” 100% of the time in a completely automated way. Never, ever, ever. This is regardless of what the technology is. No technology is perfect and every technology invented to date is governed by a set of parameters that define a state it can operate effectively in. When that state is invalidated, because one or more assumptions or requirements cannot be met, it fails. And a HUMAN has to take over.

Even though really advanced EDI/XML/e-Doc/PDF invoice processing can automate processing of the more-or-less 85% of invoices that come in complete and error free, and automate the completion and correction of the next 10% to 13%, the last 2% to 5% will have to be human corrected (and sometimes even human negotiated) with the supplier. And this is technology we’ve been working on for over three decades! So you can just imagine the typical automation rates you can expect from newer technology that hasn’t had as much development. Especially when you consider the next biggest misconception.

The Sourcing Innovation Source-to-Pay+ Mega Map!

Now slightly less useless than every other logo map that clogs your feeds!

1. Every vendor verified to still be operating as of 4 days ago!
Compare that to the maps that often have vendors / solutions that haven’t been in business / operating as a standalone entity in months on the day of release! (Or “best-of” lists that sometimes have vendors that haven’t existed in 4 years! the doctor has seen both — this year!)

2. Every vendor logo is clickable!
the doctor doesn’t know about you, but he finds it incredibly useless when all you get is a strange symbol with no explanation or a font so small that you would need an electron microscope to read it. So, to fix that, every logo is clickable so you can go to the site and at least figure out who the vendor is.

3. Every vendor is mapped to the closest standard category/categories!
Furthermore, every category has the standard definitions used by Sourcing Innovation and Spend Matters!
the doctor can’t make sense of random categories like “specialists” or “collaborative” or “innovative“, despises when maps follow this new age analyst/consultancy award trend and give you labels you just can’t use, and gets red in the face when two very distinct categories (like e-Sourcing and Marketplaces or Expenses and AP are merged into one). Now, the doctor will also readily admit that this means that not all vendors in a category are necessarily comparable on an apples-to-apples basis, but that was never the case anyway as most solutions in a category break down into subcategories and, for example, in Supplier Management (SXM) alone, you have a CORNED QUIP mash of solutions that could be focused on just a small subset of the (at least) ten different (primary) capabilities. (See the link on the sidebar that takes you to a post that indexes 90+ Supplier Management vendors across 10 key capabilities.)

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