A Great Day in American Automotive History …

Sixty years ago Today the Ford Motor Company produced it’s 50 millionth automobile the Thunderbird, and fifty years ago today General Motors produced it’s 100 millionth automobile, the Tornado, putting the automobile revolution in full swing and launching the Automotive industry to its height (before their downfall began in the 1970s and 1980s with a series of engineering, manufacturing, and marketing mishaps and disasters, a downfall which continued in the 1990s where the recession resulted in weak auto sales and operating losses). Up until the 1980s, the US was the largest automobile producer in the world until Japan overtook it.

Producing a million units of anything in the 50′s was a feat, especially for something as large and complex as an automobile, and the fact that American companies could do it … and do it well … means that they used to have great supply chain management. Remember, even local and vertically integrated supply chains are still supply chains and this goes to show the value of near-, and home-, sourcing and (deep) control over key aspects of your supply chain.

Significant (non optimization backed) cost savings always comes at a price, and that price is usually an increase in risk. Be careful. Or your company could meet the same fate of the US automotive manufacturers, many of whom had to enter into bankruptcy and receive big bailouts from the government just to stay alive.

Get Your Head Out of the Clouds!

SaaS is great, but is cloud delivery great?

Sure it’s convenient to not have to worry about where the servers are, where the backups are, and whether or not more CPUs have to be spun up, more memory needs to be added, or more bandwidth is needed and it’s time to lay more pipe.

However, sometimes this lack of worrying leads to an unexpectedly high invoice when your user base decided to adopt the solution as part of their daily job, spin up a large number of optimization and predictive analytics scenarios, and spike CPU usage from 2 server days to 30 server days, resulting in a 15-fold bill increase over night. (Whereas hosting on your own rack has a fixed, predictable, cost.)

But this isn’t the real problem. (You could always have set up alerts or limits and prevented this from happening had you thought ahead.) The real problem is regulatory compliance and the massive fines that could be headed your way if you don’t know where your data is and cannot confirm you are 100% in compliance with every regulation that impacts you.

For example, EU and Canada privacy regulations limit where data on their citizens can live and what security protocols must be in place. And even if this is a S2P system, which is focussed on corporations and not people, you still have contact data — which is data on people. Now, by virtue of their employment, these people agree to make their employment (contact) information available, so you’re okay … until they are not employed. Then, if any of that data was personal (such as cell phone or local delivery address), it may have to be removed.

But more importantly, with GDPR coming into effect May 25, you need to be able to provide any EU citizen, regardless of where they are in the world and where you are in the world, with any and all information you have on them — and do so in a reasonable timeframe. Failure to do so can result in a fine of up to €20 Million or 4% of global turnover. For ONE violation. And, if you no longer have a legal right to keep that data, you have to be able to delete all of the data — including all instances across all systems and all (backup) copies. If you don’t even know where the data is, how can you ensure this happens? The answer is, you can’t.

Plus, not every country will permit sensitive or secure data to be stored just anywhere. So, if you want a client that works as a defense contractor, even if your software passes the highest security standards tests, that doesn’t mean that the client you want can host in the cloud.

With all of the uncertainty and chaos, the SaaS of the future is going to be a blend of an (in-house) ASP and provider managed software offering where the application, and databases, are housed in racks in a location selected by the provider in a dedicated hardware environment, but the software, which is going to be managed by the vendor, is going to run in virtual machines and update via vendor “pushes”, where the vendor will have the capability to shut-down and restart the entire virtual machine if a reboot is necessary. This method will also permit the organization to have on-site QA of new release functionality if they like, as that’s just another VM.

Just like your OS can auto-update on schedule or reboot, your S2P application will auto-update in a similar fashion. It will register a new update, schedule it for the next, defined, update cycle. Prevent users from logging in 15 minutes prior. Force users to start log-off 5 minutes before. Shutdown. Install the updates. Reboot if necessary. Restart. And the new version will be ready to go. If there are any issues, an alert will be sent to the provider who will be able to log in to the instance, and even the VM, and fix it as appropriate.

While it’s not the one-instance (with segregated databases) SaaS utopia, it’s the real-world solution for a changing regulatory and compliance landscape, which will also comfort security freaks and control freaks. So, head in the cloud vendors, get ready. It’s coming.

How Many Billions Are Lost Each Year to Dumb Sourcing?

Today I saw an article entitled E-Sourcing is Dead, Long Live Intelligent Sourcing Systems and all I could say is what parallel world did this article materialize from? Given that we’ve had Strategic Sourcing Decision Optimization with multi-line item support, freight brackets, and carrier support for 17 years, advanced analytics algorithms with smart trend projection and outlier analysis for just as long, and easy access to pretty much all market and public sector buy data in e-friendly countries for over a decade, this should be the case. But it’s not.

We’re not even in a position to say half of mid-size or larger organizations even have anything resembling a modern e-Sourcing solution, and only a small fraction of those have embedded optimization capability, and only a small fraction of their customers actually use it. In reality, e-Sourcing is barely alive and just coming into it’s own. After all, the oompa-loompa empire is only valued at about Two point Five Billion … and in software terms, that’s pretty puny when you consider the market valuations of companies like SAP (approx 107B) and Oracle (approx 220B) … either of these companies could easily buy out the oompa-loompas and put them back in the chocolate factory on a whim! (Which would be a shame since they make great coders.)

But regular readers will know this to be the case, as it’s been SI’s core lament for a decade now — and the market still doesn’t look poised to change. Even though, as SI has stated over and over (and over) again, the average year-over-year savings from the proper application of optimization backed sourcing is 10% across the board. That means if you’re sourcing 105M, that’s 10.5M in savings that could be yours, as soon as you can attack all 100M of spend. If it takes an average of 3 years to get through all spend, that’s 3.5M a year for easy taking. But you’re probably sourcing closer to 1.05 Billion, which means you’re overspending by an average of 105 million, or 35 Million each year. That’s a lot of money, but obviously not enough to take notice.

So obviously we need bigger numbers. How much money is lost in the economy overall each year due to the lack of application of advanced, optimization backed, sourcing? While it’s pretty hard to get a firm grasp on OPEX in the US, and how much of that is addressable by optimization-backed sourcing (as payroll can’t be optimized, only outsourced services, and taxes are taxes), the US Census keeps good data on CAPEX, and in 2015, CAPEX was 1.65 Trillion! Ten Percent of that is 165 Billion. If, and this is an overly aggressive estimate, 10% of that was optimized, that still leaves 149 Billion on the table in the US alone. The US is about one forth of the global market, and assuming CAPEX / OPEX ratios are about equal, this says, globally, that’s about 600 Billion from CAPEX alone left on the table each year because companies aren’t optimizing spend. SIX HUNDRED BILLION. And that’s a lower, lower bound estimate. Is that number big enough for you???

Don’t Get Sucked in By Impressive Words!

It’s conference season, and that means marketing overload for many vendors. And there’s a few words the doctor is hearing a bit too much and he’s NOT impressed! So what are these words?


Digital. Digital Procurement. Digitized. Digitized Procurement. Digitization. Ugh. They’ve been using variations of the same word for almost 20 years — and despite claims to the contrary, the meaning hasn’t really changed. You’re analog, or you’re digital. There’s no degrees to digital.

Look at the dictionary definition for crying out loud! Of, relating to, or using data in the form of numerical digits. What’s new, or even enticing, about this? ABSOLUTELY NOTHING!

Internet of Things

The internet has ALWAYS been an internet of things. Computers are not people. They are computers. The only difference today is that we are sticking computers in more things to collect and transmit sensor data automatically rather than reading it, and entering it into the computer. It’s not the big whoop most companies are making it out to be as most companies haven’t developed much that uses that near real-time in a truly useful way.


It’s not artificially intelligent. It’s cognitive. And the bull crap has reached a whole new level. Let’s look at the definition.

Of or relating to the mental process of perception, memory, judgment, and reasoning.

Yes computers can perceive through sensors, store data in memory, use algorithms to assign, or judge, and use very advanced automated algorithms to reason, but we’re overlooking one key word here. Mental. Computers don’t have a mind, and they are not intelligent. The implication here is that which is cognitive is intelligent, and they are not intelligent.

We haven’t even reached true AI yet in any field and we are supposed to believe that a little Sourcing or Procurement vendor has reached the next, cognitive level of AI development? While a best in class vendor may have a few algorithms that are almost cognitive for a few, select, situations, considering the billions going into AI research and the limited progress most specialist vendors are making, you know we’re not ready to be throwing this term around.

And, an honorable mention (because, while not common in our space yet, it’s coming):


the doctor‘s been seeing this word a lot on social media in marketing and commentary, and, unfortunately, it seems like it’s starting to creep into our space. For those of us that actually went to a real University and have a sound (classical) education, we know that Postmodernism is a rather broad intellectual movement across the arts and fields with applied arts (like architecture and archaeology) based on a philosophy that takes us from the literary-influenced philosophy of modernism to a post-modern way of thinking that developed in the middle of the last century and reached wide acceptance in the 1980s, when it was a Land of Confusion.

This was the time of the MRPs (and not the ERPs). Do we really want to be associating our new and innovative solutions with that era?

So please, please, please don’t get sucked in by the the impressive words. Instead look for impressive, time-saving, value-adding functions (and forget the feature lists). (But that’s another rant.)

Will Trump’s America First Policies Put America Last?

Trump wants to bring production back to America, and that’s a noble effort and, for many companies, a smarter thing to do than they realize as escalating logistics costs and global uncertainty make near-shoring and, even better, home-shoring much less risky (and, in the long run, often more cost effective) than off-shoring, especially when there’s no good reason to off-shore.

But Trump’s recent almost across-the-board tariffs are going to cost some American manufacturers anywhere between millions of dollars to hundreds of millions of dollars as, simply put, due to a lack of availability of certain resources, Americans have to import. The net effect of so many lower-cost global options over the years is that American companies went off-shore for just about everything they figured they could get cheaper, and as a result not only has there been little to no growth in raw-material extraction and production at home, but some industries have actually lost capacity. And that capacity can’t be turned on and ramped up over night.

As a result, Americans need to import aluminum, steel, and other metals, at least for the short term. And while most of that importation should come from near-source locations (like Canada and Mexico, especially if the US wants to maintain NAFTA, which, for the most part, is better for it than Canada and Mexico [combined]) to decrease risk and increase border security (after all, it has two borders — Canada and Mexico; working with Canada and Mexico on security issues makes the entire North American continent safer), Americans have such high demand in some categories even Canada and Mexico can’t meet it all.

For now, American manufacturers have no choice to but import their raw materials from other (non-exempted) countries. It’s unfortunate, but it’s the reality. And if any of these companies have access to good global strategic sourcing optimization and supply chain planning tools, they’re going to start modelling and realize that it’s cheaper in the mid-term, and maybe even the short term, to manufacturer whatever is intended for the global market outside the US. Rev that factory back up in Mexico and serve the world from there. Only manufacture at home what is needed at home.

And what happens if companies shift their operations to other jurisdictions? America loses jobs, tax revenue, and it’s share of the global GDP. That’s, hopefully, not what Trump, or anyone inside North America, wants.

And while there should be tariffs on goods imported from jurisdictions a country can’t compete with and, in particular, a country that allows its corporations to pay it’s employees $2 a day for a job an American would have to be paid at least $58 a day for (as there’s no way America could compete with imports otherwise), those tariffs should be designed not to hurt the manufacturers who depend on raw materials they can’t get at home, or at least be used to fund local raw material extractors / producers to give those companies at home a local option. For instance, all tariffs collected should go into a fund to help local raw material extractors and producers expand or increase production, and until that happens, companies that need to rely on imports in the interim should at least get tax credits until such a time as they have a local option. Or they are just going to find ways to take as much of their business as they can elsewhere.

And that won’t make America great again, or even competitive. While I actually agree with the premise that, especially when it comes to manufacturing and agriculture and staple industries, America needs to be great again, unfortunately, just slapping import tariffs without a broader plan to achieve that goal is not only not going to help, but it’s going to hurt.