Creating a Source-Ready Supply Chain …

It’s never been easy, as there have been challenges since the dawn of time with maintaining trade routes, but we’re at a point where it’s now getting harder by the day.

Disruptions are regular.
Risk is high.
Logistics costs are high and spike regularly.
Suppliers are in constant peril.
Markets are unpredictable.
And the list goes on.

How do you create a source-ready supply chain? We know that, especially in manufacturing, you have to direct source with supply chain awareness. (As per our joint series with Bob Ferrari on how direct sourcing solutions don’t work for direct.) We also know that you have to more finely classify your categories in order to come up with appropriate sourcing strategies and day-to-day Procurement Management. That’s why we created Busch-Lamoureux Exact Purchasing which, based on the pocket cube, is the first framework with a real shot at succeeding because it’s the first to admit that risk, complexity, and impact are all fully independent dimensions and that’s why the Kraljic Matrix, and every 2*2 methodology that evolved from it, doesn’t work. And we know that centralization doesn’t work, center-led is decades behind (it’s a center of excellence that shares knowledge and best practices and orchestrates Sourcing and Procurement, with Logistics and Supply Chain, but doesn’t actually execute), and Procurement as a whole has, more-or-less, learned nothing in the past two decades (see our previous posts).

We know a lot on what not to do, and we know a lot on what to do, but what’s the cohesive strategy for a source-ready supply chain? That’s the 40 Trillion dollar question.

And there is no good, or at least no simple, answer.

But there is one common thread.

Human Centric Supply Chains

There’s been one constant in trade since it began. Two, human, parties working out an agreement to exchange goods, where the goods might be currency that represents the ability to buy goods from a third party.

Supply Chains are not managed by technology, not enabled by motorized transportation, and not designed by agentic systems. This is all done by way of human intelligence who deploy the technology to help them be efficient, use modern transportation to speed it up, and agentic systems to help them execute repetitive processes. But the common thread is human intelligence — intelligent humans applying their problem solving, risk management, and wisdom to solve problems, design processes, and apply the right technology to the task. And, most importantly, ignoring (hallucinatory) Gen-AI and hands-off agentic systems. Intelligent humans use the best augmented intelligence technology to maximize their efficiency and effectiveness, 10X-ing their capabilities compared to peers, but they ignore technology that makes decisions — they keep the decisions and strategic analysis to themselves (and their mental acuity in tip-top condition) and use tech for what it is best at, data crunching and tactical processing.

This means that a source-ready supply chain is one that is staffed by intelligent, educated humans across all key functions and locations who can bring wisdom and problem solving to any issue that might arrive and conquer it. Intelligent, educated humans that never cease their quest to learn, improve, and evolve … intelligently … while applying, when it’s appropriate, all the best practice advice that SI has given you over the past two decades.

Seven Sourcing Strategies for Today’s Turbulent Times Part 2

4. Coopetition Collectives and Frenemy Facilitation

If your volumes are low or if the supplier needs more business to ensure long-term stability, then you might need to work with your competitors to form specialized captive GPOs for key common materials and components where you all need to ensure that the supply continues to flow.

But you might need to go one step further — if your peers are smaller and less financially stable then you, you may need to invest in some of your (potential) indirect competitors who require the same materials and components from the same suppliers you need your materials and components from. You may need to identify organizational needs you can buy from them to ensure their stability. For example, as an automotive company, if you only made sedans, you could invest in competitors that only made trucks and vans by buying their products for your local delivery fleets. It’s all about strengthening your strategic supply base.

5. Real-Time Product Design Substitution

It’s no longer enough to just identify substitute products when your primary source goes offline, but to have alternate product designs that can be made with different components and materials to satisfy a significant portion of your client’s needs if one of your critical suppliers becomes unavailable. In electronics, the ability to substitute different off-the-shelf chips and boards is key, especially if they are of different form factors. In control systems, different power systems, converters, and control software. Etc. If your clients just have a need to fulfill, multiple options should be available.

6. Supply Chain Enabled Sourcing

Building on supply chain aware supplier splits, carriageway carrier consolidation, and real-time product design substitution. it becomes clear that the next generation sourcing needed for today’s turbulent times is supply-chain enabled sourcing. There’s a reason that Bob Ferrari and I claimed that standard sourcing solutions don’t work for direct, and that’s because they don’t. In direct supply chains, sourcing needs to be integrated, or at least tightly orchestrated, with supply chain and logistics solutions to be successful. Otherwise, you’re not optimizing to reality, and your best laid plans will be a total work of fiction.

7. Busch-Lamoureux Exact Purchasing

We all know the Kraljic Matrix, along with every other quadrant-based sourcing methodology is broken, but no one tells you the reason why — which is risk, complexity, and impact are all fully independent dimensions that need to be measured on completely different axes and no matter how hard you try to compress them into 2-dimensions, it will never be accurate.

But in Busch-Lamoureux Exact Purchasing, we treat them as three separate dimensions and break your sourcing categories down into a pocket cube (with 8 octants). This allows us to define appropriate methodologies and technologies to accurately address each category with confidence. Something no other methodology gives you!

Seven Sourcing Strategies for Today’s Turbulent Times Part 1

1. Sales Visibility, Sliced and Diced

For years you were told that spend visibility was the key to success. For many years I echoed that claim, because it was the truth — success required understanding your spend — who was spending with whom, where, for what, and why. The ability to slice and dice not just by category and product and supplier but location, customer base, etc. was key to understanding where your opportunities were, what volumes you should be ordering, what suppliers you should be considering, where you should have contracts, and where you shouldn’t.

But that was in the age of globalization when global trade was steady, conflicts were low, maritime channels were open, and tariffs were low and stable. Today, many countries are returning to isolationism and/or off-limits due to sanctions, conflicts are many, maritime channels are constantly restricted or closed (Panama Canal has restricted throughput during droughts and the Red Sea and the Strait of Hormuz are regularly restricted or closed due to Middle East conflicts), and one country in particular keeps changing tariffs on a leader’s whims.

Not only is supply assurance the name of the game, but supply assurance in the product lines that will sell. With costs constantly on the rise (since inflation has returned as well), you need to be focussed on your top selling product lines, and how to ensure those don’t get interrupted. This will require diving into your sales data to see what is really selling, what is trending upwards, where the product is needed, and how best to allocate your orders and shipments to serve the customers. (Then, once you have figured out what you need and how to ensure supply, you can focus on spend.)

2. Supply Chain Aware Supplier Splits

You’ve been told for decades that you need to dual-source to mitigate risk in case of disaster or unexpected supply chain disruption, and while chances are you still aren’t doing it in some key categories, dual sourcing is not enough. Two suppliers in the same region, or that depend on the same supply base is not effective dual sourcing since a single event could take them both out of the picture. You need your decisions to be geologically and supply-chain aware.

And that works great if you’re only sourcing for one regional market, both are in friendly / pseudo-safe countries that aren’t too far away, and shipping lanes are relatively secure — but if you are sourcing for multiple geologically distinct and separate regions (which can be half a world away), the home countries are not friendly, and shipping lanes are a geopolitical spat away from being shut down, that’s a supply chain shutdown waiting to happen.

If you are a global multi-national selling in multiple, geologically distinct regions (North America, Latin America, UK, Europe, Middle East, Asia, Australia, etc.), you need to be building a multi-supplier global supply base where you have a primary supplier close to each location in a friendly, or at least, safe country and a backup supplier not too far away, which can be the primary supplier for another region. You might need half a dozen to a dozen suppliers for some products / categories to ensure supply assurance.

3. Carriageway Carrier Consolidation

Just like you will need multiple suppliers, you will need multiple carriers — at least one per region, and two if your shipments are large or the reliability of any single carrier (due to financial situation, fleet size, etc.) is questionable. You’ll have to group your lanes by regional transit and select the appropriate carrier for each just like you’ll have to select the right supplier for each region.

WE STILL NEED BETTER EVENTS!

Two Years ago we wrote a long post on why we need better events. Please take a moment to re-read it before we continue. We’ll wait.

 

I SAID WE WILL WAIT. NOW GO BACK AND READ IT!

 

For those of you who didn’t follow instructions, here was the jist:

Most of today’s big events are a complete waste of time and money for practitioners and vendors alike!

For vendors, they are paying 50K to 100K with no guarantee of getting a single good lead that will turn into a sale, especially since if they can only afford the cheap booth, they are in a corner behind a pillar far from the main door/refreshment area and no one will find them. There are efforts that start at 1/10 the cost that have a better chance of getting real leads.

For practitioners, they’re spending 10K+ for a “working” vacation where they aren’t learning anything and coming back more tired and less energized than when they left. For organizations sending a small team, they can get a much better ROI with other efforts.

At the end of the day, the only people who get value from these events are:

  1. Consultants who just pay an attendee fee and spend all their time focussed on vendors that might help them send their services and engaging Directors/CPOs to sell themselves for projects
  2. Organizers who make a very tidy profit off of a valueless event they lure you too based on hype, not value

The answer we gave at the time was that we needed events that were:

  • Focused – relevant problem or tech
  • Balance – more practitioners than vendor reps, preferably at least 3:1
  • Size – small: 50 to 500 depending on focus and balance and vendor participation

And that’s still the core but today, more than ever, we also need:

  • Tech Ed: not just what tech can do, but what processes you need to drive it, what skill level you need to use it, how to select it, and, most importantly, how to assess readiness and realistic implementation timelines (unless you want to join the 88% failure club [94% if AI])
  • AI Ed & Hype Busting: enough panels with a bunch of clueless C-Suite Executives with less TQ than your pre-schooler sitting around making fantastic claims about what their AI is going to do in the future if you just buy it today; real education from real PhDs who spent years building and studying the tech who will truthfully tell you what it can do, what it can’t do, and, most importantly, in the age of Gen-AI what it’s accuracy/success rate really is, especially if your data is cr@p
  • Situational Awareness and Practical Advice: you can’t ignore geo-politics anymore — the time of free trade is over, rules are changing by the day, risks are at an all time high, and the economics that once defined your global supply chain are crashing and burning; events need to be focussed on not just a tech or problem, but market size and geography and/or organizational profile so that attendees can attend talks by appropriately invited lectures with current real-world insight who can give practical advice and make your 10K+ worth it!

We’ll end the rant here for today, but we’re not done. It’s your money, and you should demand better!