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We Need Performance, Not Speculation

In his recent EBN Weekly Editor’s Blog, Brian Fuller posed the question, “Have we lost control?” which has me wondering if we ever had control. Clearly, everything seems to have shifted, but then again, change, not stability, is the norm.

The West has only dominated the world in the last few hundred years, and America only rose to its position of power after the two great wars annihilated our competition. So to see things shifting a bit is not surprising. No nation has a monopoly on cunning or brains.

We see foreign students and the children of recent immigrants graduating at the top of their classes while resident-born students have wildly mixed performance. This shouldn’t be unexpected as other countries are sending their best and brightest for education. Immigrants, the reason we have been successful for generations, have always been hard working and motivated individuals pushing their children into a better life. If our children underperform, it’s our fault; others are proving great educations can be had here. But that’s not it either — what have we lost control of?

Wrong Way

We seem to have lost control of our destiny, somewhere  in the gap between the speculative world and the real world.

We seem to have lost control of our destiny, somewhere
in the gap between the speculative world and the real world.

What's the problem?
We seem to have lost the ability to control our destiny. You work hard but fall farther behind. You can’t count on much to be “as expected” in the future.

I believe that many of our practices, long-held beliefs, and tools are failing us. Perhaps everything has always been as unpredictable as the weather, but now it seems worse.

One example of a tool failure is the stock market. It seems to have morphed significantly from its original purpose. I believed, maybe naively, that its purpose was to help companies raise capital for their business operations. Now it seems to be a platform for speculation where most of the money raised goes to traders and speculators rather than the company.

How does the largest IPO in history — Facebook, hyped at $100 billion — only put about 6 percent of this hype as cash on its balance sheet; where did the other 94 percent go? How can a company like Microsoft grow revenues by 8 times over the past 10 years and have its stock price stay flat at $30 over the entire period unless speculation dominates performance?

When private companies go public, it seems to be primarily about making the investors and founders richer, not to fund the company. It’s interesting that Dell is looking at private equity rather than staying public; it must be because the market is driving behaviors that are not in the best interest of building a strong company.

So what?
In an earlier blog post, I wrote about the real world economy and the speculation economy. (See: An Inevitable Clash.) The tool failure above points to the speculation economy whereas our souls are in the real world. Our feeling of loss of control has roots in dichotomies like this. What about failures in beliefs and practices?

Supply chains have changed considerably in the past 15 years, increasing in both depth and complexity, but our hierarchical tools and “tried and true” practices have not accommodated these fundamental shifts. Many supply chains have had an extra layer of depth added in the manufacturer, distributor, on-and off-shore EMS and OEM stack while, at the same time, having internal support resources reduced. Within these stacks, roles have changed.

Distribution, originally conceived as a means of accommodating small to medium-sized OEM access to materials, has higher inventory turns than manufacturers. Their performance is under attack (by speculators), forcing them to diversify service offerings in an attempt to stay relevant as their margins fall. The privately-owned distributors seem to be staying true to their original purpose and appear to be doing quite well, at least to real world metrics like customer satisfaction and service performance.

With increasing depth and complexity, many OEMs have lost visibility into materials cost. Inventory revaluation and reconciliation with an EMS is a nightmarish process. Today, most OEMs' data are in poor shape with duplications, errors, and omissions. To me, these are process and practice failings.

My company provides Freebenchmarking.com and, with the support of UBM Tech, Component Cost Estimator. These are supply chain analytic tools that compensate for these real world deficiencies by empowering supply chain professionals with information. Our customers have a stronger feeling of control as they take advantage of our pricing, quotation, and benchmarking analytics.

We need to rethink how and why we do things in the real world. We need solid performance, not speculation. It is time for some solid, introspective noodling.

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29 comments on “We Need Performance, Not Speculation

  1. Brian Fuller
    April 25, 2013

    I couldn't agree more, Ken. I'd like to see a study — to your point — that showed many IPOs in the past 15 years were really needed to fuel growth. I'd also like to see some reasonably objective comparison of the rate of innovation between publicly held companies and privately held companies. There's a time pressure with one that puts pressure on R&D teams, which then iterate; perhaps the privately held companies with somewhat less pressure make bigger product and technology leaps because they're more thoughtful with their extra time. 

    Maybe I'm just completely off base (wouldn't be the first time). 

     

  2. William K.
    April 25, 2013

    The unfortunate fact is that our control is indeed less than it used to be, primarily because of others working hard to take control and get more money. In other words, GREED! In previous times people may have been just as greedy but there were often other factors in place that hampered their ability to always succeed. Now it seems that the things slowing the greedy have been removed, and instead they are being assisted in the act of taking from everybody else, instead of being prevented. So while for a long while we moved toward a greater level of civility and justice, the direction has been reversed, and decency and justice are often not even the goal. Not that we ever got that very close, in the past, but that we intended to become more just and moral, in the past. The direction of travel has reversed.

    Unfortunately itmdoes not seem that it will be easy, or even possible, to reverse the trend through any moderate effort. In fact, given the way those in charge are presently pushing, a return to a better direction does not seem likely at all. 

    Sorry about not having a bucket of sunshine to hand you at the end of this comment.

  3. HM
    April 26, 2013

    nice article. liked the way it started with mere comparison of the society culture and then taken to supply chain issues.

  4. Redding McLemore
    April 26, 2013

    Interesting comment on distribution turns.  The world seems to have adopted the perspective that low turns are signs of poor inventory management with no regard to a company's business model or the relative cost of the material versus the cost of acquiring the material.  Distributors are an important buffer given that forecasts are by their nature uncertain and flexibility demands schedule changes.  It is presciely the distributor in the supply chain that should have lower inventory turns.  Thankfully there are a few out there that still do.

  5. Mr. Roques
    April 27, 2013

    There's something about growing up with a certain level of comfort that makes kids lazy. When foreigners come to the USA, they usually come from countries with bigger difficulties and they are more focused about succeeding.

  6. Houngbo_Hospice
    April 27, 2013

    @Mr. Roques,

    “There's something about growing up with a certain level of comfort that makes kids lazy.”

    There is nothing wrong about making your kids live a confortable life – in the limit of your means. Part of the problem may be due to the fact that those kids grow up to be consumers rather than producers or innovators. 

  7. Houngbo_Hospice
    April 27, 2013

    @HMN,

    The article do shed a light on what is wrong about the current american performance strategy. Question is how to fix it and make sure that the problem will be dealt with before it is too late. 

  8. prabhakar_deosthali
    April 28, 2013

    In today's world everything is fast becoming a trade able commodity – So apart from the Stock exchanges , we now have commodity exchanges where metals like copper, zinc  and all such commodities are traded and then this becomes the world of speculators who mint money out of nothing.

    In electronic supply chain , I fear , some commodity exchange will offer trading for electronic components and the speculators will hoard the stocks of components in demand and the real buyers will have to pay through their nose to get them.

    What will be the role of distributors then?

  9. syedzunair
    April 28, 2013

    Hospice_Houngbo:

    The thing is that living a comfortable lifestyle does not necessarily make a youngster lazy. The options he chooses in life make him that way. I know many kids who live a terrific live comfortably but are very active in their day to day routine. They play cricket, badminton & other sports while laying a strong emphasis on studies. 

  10. itguyphil
    April 28, 2013

    Choice is the key to motivation.

    Demeanor is not a good judge of what type of person someone is.

    The results are!

  11. Taimoor Zubar
    April 28, 2013

    In electronic supply chain , I fear , some commodity exchange will offer trading for electronic components and the speculators will hoard the stocks of components in demand and the real buyers will have to pay through their nose to get them.”

    @prabhakar: That's an interesting proposition and doesn't seem so incredible as well. Already a lot is being made through the exchange of raw metals used in the electronic components like copper and aluminum. I guess we might start seeing hoarding of electronic components as well and also see their prices being determined in commodity exchanges.

  12. Taimoor Zubar
    April 28, 2013

    @Redding: I agree. Distributors do play the crucial role of streamlining the inventory flows and smoothing the supply chain even in times of huge demand fluctuations and uncertain supplies. Although their role has always been looked down upon both by end consumers and manufacturers, the fact is the they're indispensable in many ways.

  13. Houngbo_Hospice
    April 29, 2013

    @syedzunair,

    “The options he chooses in life make him that way.”

    Agreed, it is important to teach our kids how to choose the best options possible and help them live a balanced lifestyle.

  14. MUHAMMAD SHAHYAN IQBAL
    April 29, 2013

    Yup He is rite.

     

  15. itguyphil
    April 29, 2013

    And it's even better when they learn it and practice it themselves.

  16. Houngbo_Hospice
    April 29, 2013

    @pocharles, The problem is that parents are nowadays buzy at work and don't have time to teach their children the cardinal values that will give them the confidence they need to become more competitive. I wish every parent will come back to the fundamentals about raising competitive kids.

  17. itguyphil
    April 30, 2013

    “The problem is that parents are nowadays buzy at work and don't have time to teach their children the cardinal values that will give them the confidence they need to become more competitive.”

    It's sounding like that is the source of the problem

  18. Adeniji Kayode
    April 30, 2013

    @pocharle,

    you are right, it is until they are able to practice themselves that you can really  acertain that they have relly learn.

  19. Adeniji Kayode
    April 30, 2013

    Good point Hospice,

    Children learn from several ways, informal education from parents top them all. The problem is that parents are allowing other means to do the teaching for them yet expect so much of their children.

  20. itguyphil
    April 30, 2013

    Absolutely. actions always speak louder than words

  21. William K.
    May 1, 2013

    The whole thing goes a lot like a recent “Dilbert” cartoon, where the boss points out that their bonus depends on people that they don't know and have never met. We stopped being in complete control of our destiny about the time that we started to barter for goods and services, and it has gone downhill from there.

    And I agree thatr while the original intent of the stock market was to allow for capitalization of business, it certainly has degenerated into a means for speculators to gain income without earning it and worse, without producing anything of value at all. Which, functionally is theft, although the current laws don't see it that way. If there is a solution it will probably be very painful and injure a whole lot of folks, but I don't see any real solution that could be implemented. After all, how in the world do you get rid of greed and avarice that are so deeply embedded in a culture? I think that probably we will be “riding this train until it crashes”, which will not be any fun at all.

  22. syedzunair
    May 6, 2013

    pocharle: 

    Agreed. One should be result oriented always. 

  23. syedzunair
    May 6, 2013

    Hospice_Houngbo:

    Yes, the upbringing of kids is a difficult proposition and one should be very careful in what is being taught to the children. 

  24. itguyphil
    May 17, 2013

    Yupp. In life, you learn more via experience that you do books.

  25. itguyphil
    May 17, 2013

    Yupp. THat's truly all that matters.

    We don't do things just for fun. At least if we want to stay in business.

  26. syedzunair
    May 19, 2013

    Precisely! If you are to remain in business you have to be very dedicated and ensure that things are moving in the right directions. 

  27. itguyphil
    May 20, 2013

    The latter part of your post is the key as well as the enigma of business. You have absolutely no idea what IS the right direction.

  28. syedzunair
    May 26, 2013

    So, getting the sense of direction is important. I get that but the question is how do you get that direction? 

  29. itguyphil
    May 26, 2013

    In most cases, listen to your customers and exceed their expectations.

    The tricky part is staying on top of what they'll want next to continue to exceed their expectations and keep them as customers long-term.

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