Are 45% of Enterprise Leaders Asleep at the Wheel?

According to a short recent article over on Supply Chain Brain on “Next-Gen Supply Chains: The Transformative Role of Supply Chain Leaders in Today’s Business” which quoted a GEP and Economist Study on “Next-Gen Supply Chains: The Transformative Role of Supply-Chain Leaders in Today’s Business”, 55% of enterprises anticipate a major supply chain disruption to strike at any time.

Are 45% of enterprise leaders asleep at the wheel? The chance of a disruption has been getting worse by the day for at least the last decade (if not the last two)! In 2014, Reslinc tracked almost 300 major global supply chain disruptions across natural disasters, factory explosions, labor disputes, power outages, chemical spills and geopolitical upheavals that impacted the supply chains of multiple global companies. That’s almost one major disruption a day, every day!

In 2013, at least 8 out of 10 companies had experienced a major supply chain disruption in the last two years (Supply Chain XChange). By 2014, one year later, 3 in 4 supply chain professionals admitted they experienced a chronic supply chain disruption. (APICS) Since then, natural disasters (fires, hurricanes, tsunamis, etc.) have increased year over year. Geopolitical conflicts, including wars, are on the rise. So are droughts, and now we have the double shipping whammy of the reduced capacity of the Panama canal part of the year and the ongoing Red Sea Crisis. We also have sanctions with unintended consequences, power shifting to the BRICs, world class pandemics, and a country Big X Consultancies made us 100% dependent on willing to shut down entire cities at a moment notice on an impossible zero-tolerance policy. We’re literally at the point where every company has an almost 100% chance of experiencing a considerable disruption in the next 12 months.

So I ask again, are 45% of enterprise executives asleep at the wheel?

Forget Cost Reduction. It Ain’t Happenin’. Best you can hope for is Cost Avoidance!

Costs are going up. And since you spent decades, including a decade and a half where those of us who could carry the thought experiment to its logical conclusion told you not to, outsourcing everything you can to China and low-cost locales in Asia and Eastern Europe, there’s nothing you can do.

The sanctions on Russia, which are skyrocketing energy costs in parts of Europe, are raising prices.

The logistics challenges, as a result of lost capacity from perfectly good ships being scrapped during the Pandemic and a new requirement to sail around the capes again (Houthis in the Red Sea, droughts in Panama reducing canal capacity), is raising prices.

Just the threat of thumping tariffs from the incoming President in the US is already starting reciprocal threats and trade wars (because the billionaire the US elected doesn’t seem to understand it’s the working class people who pay the tariffs, not the countries being sourced from, and that tariffs are to prevent markets from being flooded with goods that citizens can buy at home … and shouldn’t be used to prevent citizens from getting goods they can’t get otherwise).

China is cutting off access to critical raw materials and rare earths, when it represents the majority of the global supply (and where Russia was second or third).

Year-over-year increases in natural disasters (which are only going to increase in frequency as the US abandons any efforts whatsoever to curb carbon and GHG emission and slow global warming) is destroying larger and larger portions of global crops annually while global population is still increasing.

We could go on, but you get the point. You’re not reducing cost anymore. The best you can do is control it, and that’s going to take all of the strategic sourcing strategies available to you, as well as the best sourcing platforms to make it happen.

Which means you need to focus on cost avoidance. More specifically, we mean reducing the amount you have to buy, not just mitigating expected cost increases through better buying practices. More specifically, we mean minimizing waste and eliminating the needs for a purchase in the first place. This means, among other things:

  • eliminating disposed/fire-sale inventory at end of life (and up-front buys)
    optimizing the production relative to the demand (and eliminating the bullwhip effect)
  • reducing defects AND returns
    defects cost money to process, even if the buyer gets credit; and returns cost a company many times what the product costs — the product needs to not only be defect free, but right for the customer
  • reducing MRO
    this involves not only buying only what you use, but only using what you really need;
    i.e. does the executive need to print out all the reports? probably not, and maybe it could be prevented with a one time buy of a second monitor or an iPad Pro
  • reducing services
    do you need your office cleaned every night? probably not! (and if your employees are that messy, tell them to grow up or get out); do you need PR services if you’re in enterprise to enterprise sales? most likely not! do you need an annual Big X operations review just because the former CEO always did it? definitely not! (you just need to identify your inefficiencies and get point-based help to remove them)
  • reducing long-term inventory
    long-term, not mid-term, and definitely not short term; we’re well aware that the move to JIT ultimately crippled manufacturers during the pandemic, and it was something we foresaw when we first advised you to stop offshoring everything, but that being said, if it typically takes 30 days to restock, given that there is often the option of airfreight in a worst case situation, more than 90 days inventory is likely excessive and costly; and if you’re holding inventory for 180 or 360 days, that’s too long, and too costly; optimizing inventory to sensible sizes reduces inventory cost as well as minimizing the chance of end-of-life/expired inventory that has to be trashed

In other words, you have to go beyond the buy to analyze if the buy is even needed in the first place, if the demand can be reduced (optimizing production to realistic projections, reducing demand for paper with tablets), if the quality/targeting can be improved to reduce returns, and so on. The only way you are going to save with certainty in the economy that is coming is to NOT SPEND IN THE FIRST PLACE!

But What About the Oompa Loompas?

A recent article over on SupplyChainDive on Unwrapping Hershey’s $250M Supply Chain Upgrade noted that Hershey is undertaking a huge supply chain and manufacturing project to enhance agility and efficiency throughout its operations.

The goal is to digitize and automate Hershey’s processes, optimize procurement and manufacturing, and accelerate R&D and planning to boost visibility and streamline operations. The goals are better integration of demand planning and more automation in the supply chain. by the end of the process, , the goal is visibility from supplier to retailer (and back again).

This is not Hershey’s first mega project, as it has recently invested over One Billion Dollars in its supply chain network, investments that included a new chocolate facility, additional production lines, and line upgrades. It also invested in SAP S/4 ERP integration to get cross unit business visibility, including visibility into its acquisitions of Amplify Snack Brands, Pirate Brands, Dot’s Pretzels, and Pretzels Inc. in an effort to identify redundancy and unnecessary complexity in the supply chain.

At the end of the upgrades, Hershey expects to have over 95% of transactions flowing through one system, which will provide unparalleled visibility, as well as increased procurement and inventory management efficiency. In addition to better alignment of production with demand with inventory, it also helps Hershey with predictive maintenance schedules and production scheduling, as they can modify production runs as needed with shorter changeover times (due to improved visibility).

When all is said and done, Hershey hopes to save 300 million annually, with 30% of savings due to supply chain productivity improvements alone. This is all fine and dandy, and will put Hershey in a position its peers will envy, but what about the Oompa Loompas? The additional production lines, provided they created more jobs, were a good start … but we know those Oompa Loompas would like to return to the glory days of Chocolateering.  (And we know how much they have suffered for the past 20 years.  Just check out some of our historical posts.)

666+ S2P+ Solutions … But Key Problems Are Still Not Addressed!

You’ve seen the Mega Map and the 666 solution logos on it.

You’ve heard the doctor and THE REVELATOR say repeatedly that another massive purge is coming to our space over the next 18 to 24 months (which will be the greatest since 2009-2011 where hundreds of companies were acquired, merged, or went insolvent), and that it’s already starting (with a few notable insolvencies, at least as far as the doctor is concerned, already occurring).

You’ve heard us say that there isn’t room for this many companies because even if you account for market size and vertical, we still only need so many solutions of the following varieties:

  • Sourcing
  • Supplier Management
  • Spend Analysis
  • Contract Mangement
  • e-Procurement
  • Invoice to Pay (I2P) / Accounts Payable (AP)

And even when you consider the wide variety of needs across all possible size – vertical -region combination, two to three dozen solutions in any category is more than enough to handle all of the complexities when you take even the most varied companies into account, but we now have over a hundred options in some of these categories. Only the strong, sorry, the smart, will survive … and only if they have enough money to do so (and enough control to make smart decisions, i.e. if they are controlled by greedy investors who double and triple prices that force them out of their target market, they will be the next casualty).

But even with all these solutions, core needs are not met. The reason being: in today’s business environment that is seeing a return to protectionism, sanctions, and border closings; a continual rise in natural disasters (thanks to global warming that will once again reign unchecked under administrations coming into power in multiple “first world” countries); and a continual disruption in logistics (due to epidemics, pandemics, reduced capacity, Panamanian droughts, and Houthis in the Red Sea), solutions are needed that go beyond siloed Procurement.

Back in 2022, THE PROPHET first tried to get the message out there with his proclamation that alt-suites would rise. (They still haven’t, but we do need new types of cross-functional applications.) He also made five predictions. They varied in terms of usefulness and vision (in the doctor‘s view, two in particular are desperately needed, although one of these needs to be broader than defined; one is nothing more than just an enhanced dashboard across various S2P applications and needs to be rethought, and two aren’t quite right [but contain ideas that can be built on]).

But THE PROPHET was right in that we need to rethink Procurement Technology in some organizations, who needs to contribute to Procurement, and how Procurement Process fits into overall operational processes. The solutions that worked for the last 20 years aren’t always enough anymore, and it’s not just a question of “intake” (which is not new despite what the providers will have you believe, see our prior posts on the subject) or “orchestration” (which is just a fancy term for SaaS middleware).

Here are three solutions that are needed now more than ever:

1. Design for Supply (DFS)

THE PROPHET was right on the money here. Not only is 80% of the cost locked in during design, but so is 80% of the risk. You not only need cost control, but you need supply assurance. This means that R&D needs to work with Procurement during design to ensure the products can be sourced affordably at low risk, and that Procurement needs to work with Supply Chain / Logistics to make sure the products can be reliably sourced in a timely manner (and the organization won’t have to stock months and months of inventory). Product design and development organizations need integrated DFS solutions that span R&D, Procurement, and Supply Chain.

2. Supply Chain Sourcing (SCS)

In the world of Direct, when organizations need to source for BOMs (Bill of Materials), they need to do it Supply Chain Aware. Under pressure, Procurement will always search for the lowest cost — but what if that is from a supplier in an unstable region; that is not part of the current, optimized, supply network; that can’t offer timely and secure delivery? Sourcing needs to be supply chain aware. And Supply Chain needs to be aware of what Sourcing is looking at so they can do network planning if the current supply network is not sufficient.

In fact, it would be even better if the DFS and SCS solutions were hosted on the same underlying platform.

3. Risk 360

This was the second platform where THE PROPHET was almost right on the money as well with his Assess-to-Monitor alt-suite. Risk is everywhere, both inside and outside the organization, inside and outside your partners’ organizations, inside and outside your suppliers’ organization, and its everywhere your physical, financial, and digital supply chains touch. Supplier risk, supply chain risk, cybersecurity risk, personnel risk, etc. can’t all be separate solutions. They need to be one integrated platform that constantly monitors, assesses, and protects your organization.

There are, and will continue to be, a need for new solution types, in S2P+, but these would be a great start!

Dear Vendor: Your Top 10 ProcureTech resolutions for 2025: Part 1

We know that our last post said that we were done with our dumb, dead company walking, and smart company series, and officially we are, but if you’re going to make ProcureTech resolutions for 2025, then you should at least make good ones. So we’re going to give you ten great ones. The first five today. The next five next Monday.

#10 Cut the Cr@p

First of all, Procurement does NOT need to be reimagined! As per our post back in July, Procurement is not something to be reimagined as it is not something that should even be redefined at the core. The purpose of Procurement has not changed since the first known Purchasing Manual was published back 137 years ago. It’s the process of sourcing, acquiring, and paying for the goods and services the organization needs, and doing it in a manner that ensures that the products will meet the needs, at the best price, and show up at the right time — and that as many orders as possible are “perfect” (or, more precisely, problem free). No more, no less.

If you want to survive the coming consolidation that will see a massive amount of mergers, acquisitions, and outright failures, you need to sell. If you want to sell, you need to not only solve customer problems, but convince the customers you can solve theirs. And the best way to convince a customer you can, and will, solve their problem is to be completely honest and transparent about your solution, what it does, how it does it, and what it will deliver against the real needs they have. With no cr@p.

#9 Data Foundation

In Procurement, everything relies upon good data. Solutions require good data — platforms, the modules they contain, the algorithms that power them, and every other technical component. Moreover, the humans relying on those platforms require good data to make decisions — good data that is processed by analytics into good information that give the human professionals the insight they need to make the right decisions. (At the end of the day, it’s human intelligence [HI] and the best platforms support human intelligence with Augmented Intelligence.)

This requires doubling down on creating a good schema, collecting good data, verifying that data, and maintaining that data over time. It shouldn’t be just collect some data haphazardly, execute a function, push it to a table in the database, and forget it. Your solution has to be normalize and cleanse the data, validate the data, use the data as required, store it in a standard schema, and mark any data that can change to be reverified on a schedule.

Organizations need a data foundation. Make sure the data foundation you give your customers is enough.

#8 Risk Awareness

COVID (Pandemic). Special Military Operations. (Geo-Political Conflicts, Border Closures, and Sanctions.) Canal closures and more Logistics Challenges. (Panamanian droughts and Houthis in the Red Sea.) Tariff threats (that are soon to be reality). This is just the beginning. The soon to be total abandonment of climate regulations in the US (and possibly a few other “first world” countries) is going to accelerate global warming (if the number of bombs dropped in the Middle East over the past year hasn’t accelerated it already). This will result in more unpredictable natural disasters. The tariffs coming in the US are going to spark unpredictable trade wars. Monetary and oil shocks that will come from the BRICS allowing alternate currencies to be used, as well as pursuing their own, will lead to more risk and disruption. The ease in trade we saw for the first two decades of this century may never be seen again in our lifetimes. Risk is everywhere, and compounding daily.

Thus, you must ensure that your solution is as risk aware as it can be. Sourcing modules must collect risk information. Analysis modules need to collect and process risk metrics. SXM modules need to track all available qualitative and quantitative risk information about every supplier being used. Contract modules need to support, check for, and suggest risk clauses. Procurement modules need to bring up risk information before every order, and automatically block suppliers where the risk has become too great.

Risk is critical. That’s why Sourcing Innovation did a 9-part series on supply chain risk.

#7 Focus, Focus, Focus

Don’t try to be everything to everyone. Don’t even try to be anymore than you are. Procurement people are realizing that any company that claims this can’t deliver because you can’t be everything to everyone. Instead, focus on your core modules and strengths, define your ICP, double down on your value prop, and focus on being the best you can on those modules and strengths.

Doing so will increase your chances of customer success, and customer success generates potential customer interest. Plus, focus will allow you to optimize your sales, implementation, integration, and execution processes; get customers up faster; get them results faster; make them happy faster; and that will lead to renewals and, most likely, increased subscriptions at renewal time.

We’ve tried to hit upon this point throughout the years, most recently in our smart company series, but hopefully this is the year it will stick.

#6 Integrate, Integrate, Integrate

Since you can’t be everything to everyone, you need to focus. And since customers will usually need more extensive solutions than any vendor can offer, usually for specialized needs, the most successful vendors will integrate with complementary best-of-breed vendor solutions that will make it really, really easy for their customers to share the data they need between the applications they need.

The key is to support an end-to-end ecosystem for Source-to-Pay+ by integrating with all of the solutions necessary for your customers to support end-to-end Source-to-Pay+ solutions. Successful companies make their customers successful, no matter what. They work with partners and complementary providers as needed.

Organizations need platforms, not just point solutions. Especially since you need to be risk aware.