2017 KATZSCAN NEWSLETTERS

 More touchpoints does not equate to great customer service experience.

According to an article in the September-October 2017 edition of Supply Chain Brain magazine, nearly 50% of North American and European consumers will abandon a brand if they experience dissatisfying customer service across the various engagement channels, e.g. company web site, email, in-store knowledgeable sales people, telephone customer service, and the like. 

Unfortunately, too many companies equate touchpoints with customer service. For example, the belief that if the company emails the consumer a lot of information about the status of the sales order from order receipt to pick to ship, this alleviates the need for good customer service. To the contrary, what this likely does is alleviate the need for the customer to inquire about the status of an order, albeit it depends upon how clear the communications are from the company. These touchpoints do not absolve the company from providing good customer service about the reasons for order delays, short-shipments, incorrect shipments, lost shipments, delayed shipments, out-of-stock problems, pricing questions, promotional help, and other issues related to the order, item, and shipping. 

The old saying that bad news travels faster than good news is intensified in the Internet age as information travels faster and broader with the advent of social media. Per the article: 

>> 47% of consumers will stop doing business with a brand due to continued frustration.

>> 32% of consumers will take the time and effort to email the company to complain about poor service. (The article does not delve into whether these communications are used by the companies to improve their customer service operations and technologies.) 

>> 29% of consumers will tell friends and family about their brand abandonment due to frustration. 

The key to successfully engaging customers is not to merely or simply over-engage them and overwhelm them, believing that the customer has to be touched at every opportunity. The right solution is to understand where the customer needs to be engaged and how that engagement should be handled. At which junction in the process does the customer need what information? What level of personalization is necessary at each touchpoint? What is the best way to communicate the information to the customer at each touchpoint? 

As we get deeper into the hectic holiday season, examine your emails and postal mail a little differently this year. Analyze which companies are doing an effective or ineffective job at getting your attention or keeping you informed, whether it is about your order or about your favorite things. How is the company you work for – or own – doing relative to your competitors, your peers, and the company’s where you are doing your holiday shopping? 

A very happy holiday season to one and all! Many thanks to all of those who have supported me this year and throughout all of my years!

E-commerce isn’t an easy endeavor for everyone.

The article titled “Why Do Many Small, Mid-Sized Distributors Struggle With Adapting To E-Commerce” in the July-August issue of Supply Chain Brain magazine reminded me of my local vitamin shop.

The shop is owned by a very affable gentleman who appears to be in his early 60s. He runs a nice business and seems to have a good-enough flow of clientele where he can muddle through down times well-enough. Some of his customers are snowbirds so his business is seasonal as they are not here year-round. 

The item tags on the shelves are all hand-written. The cash registers, there are two of them, are simply used to collect cash. The credit card swipe machine is a separate device from the cash registers. There is no inventory system other than what may be written in a log book or is in someone’s head at the time the store shelves are reviewed on a daily basis to determine what item stock is low and needs replenishment. And at the same time the employees examine what has not been selling well and should be placed on sale at a discount. Thankfully the owner has a small contingent of loyal and knowledgeable staff. This is why I like the store: the staff knows their vitamins. 

The store staff – ages between early 40s to early 70s – have all expressed to me their frustrations with the fact that the store is not computerized and their inventory tasks are so manual. Further, the store does not collect email addresses of their willing customers to send out any information such as monthly newsletters, discount coupons, informative wellness insights, or advise of products on sale. 

Needless to say, this store has no e-commerce whatsoever and is missing out on the sale of products to snowbirds who must stock up on goods before they leave town or – more likely – just buy what they need locally whey they get back up north, whether that is in the US or Canada. 

In the article, Industrial Distribution’s 2017 “Survey of Distributor Operations” which was conducted in March found that: 37% of respondents said that e-commerce is not a priority; 43% said that they just are not offering e-commerce; 49% said their website content is updated less than monthly; greater than 19% said that they can’t recall how long it had been since their website was updated. 

An e-commerce strategy need not be a difficult endeavor to jump in to, and need not mean the exact same thing for everyone. Perhaps an e-commerce entry is to begin with an electronic customer relationship outreach marketing campaign to pull people in to the store which will increase revenue. Implementing an integrated point-of-sale and inventory system would help employees spend more meaningful time with customers; just make sure the system lends itself to e-commerce when the time is right. 

Not focusing on a digital strategy is simply not good business sense. I think that business leaders are naturally apprehensive when considering something like e-commerce because of the perceived large leap when in reality the better approach is manageable steps throughout the entire process. A digital strategy and an e-commerce channel are different and are competitive advantages, offering increased visibility and broadening revenue streams. Business owners and leaders should give serious thought to embracing both of these strategies which are extensions of the core operations processes and software used to run the business, and can certainly be strategically implemented without breaking the bank. 

Reminder: Walmart stricter delivery standards are here!

Thanks to the August 2017 edition of Logistics Management magazine for the reminder that Walmart’s stricter vendor compliance requirements kicked in as they relate to delivery standards. 

Instead of the previous four-day shipping window, suppliers now only have a two-day window in which to ship their goods. The compliance rate for this metric has increased from 90% to 95%. 

The financial penalty for deliveries that are non-compliance is 3% of the cost of the goods. 

(For readers of my either of my books, “Successful Supply Chain Vendor Compliance” or “Detecting and Reducing Supply Chain Fraud”, you will be aware that penalties assessed across the entire value of the shipment may be considered punitive when compared to the actual financial damages and administrative fees incurred, and the excessive penalties could thus be considered illegal according to the Uniform Commercial Code.) 

The article also informs that the 3% fee is also applied when less than 95% of the order is received by the Must Arrive By Date (MABD). So if you as a vendor cannot get 95% or more of your order to Walmart by the MABD, you should cancel the purchase order and can do so without penalty … at least without immediate financial penalty. Certainly, too many canceled purchase orders will not look favorably on your vendor scorecard and will eventually start to put your vendor relationship at risk. 

The changes are necessary, according to Walmart, to cut costs and avoid having the stores act as warehouses and stock too much inventory, shifting to a more just-in-time business model. 

These changes are bound to cause concern to many Walmart vendors who will now be forced to make-to-stock, increase their distribution performance, and likely automate their supply chain software systems to run 24/7. 

On Walmart’s side, I hope that they have stepped up to the plate and improved their vendor compliance guidelines, revamped their vendor compliance portal, and added vendor help personnel throughout their various departments (e.g. technology, logistics, vendor compliance) to ensure vendor questions are immediately and accurately answered. 

If you are a retail vendor and need help in improving your operational performance, getting a grip on the right ERP and EDI technologies, and controlling chargebacks, reach out to me for help. With all else being equal in manufacturing and/or distributing a quality product, what wins the game these days is supply chain performance execution. 

As the author of the first – and I believe still only – book on supply chain vendor compliance, I bring the perspective you need to win against your competitors and keep your retail customers truly supply chain partners.

Faulty formatting fouls federal funding.

An Associated Press piece that ran in my May 10, 2017 Miami Herald newspaper initially just struck a raw nerve about the typical mindset of government types, but as I re-read the article there is a lesson to be learned for those involved in supply chain relationships too.

Apparently the Department of Education rejected dozens of university and organization applications for federal funding due to formatting errors such as incorrect line spacing, incorrect margins, and using the wrong font. The program affected is called Upward Bound which received $263M in 2015 and helps over 62,000 high school students. The Department of Education this time received 1,592 applications for the five-year grants of which it accepted 1,222 for review. Seventy-seven applications were rejected for formatting inconsistencies to the guidelines established under the Obama administration. 

I did a brief search on the Department of Education web site for the Outward Bound program to see if I could find any submission guideline information. While I did find the Outward Bound program information I could find no grant guideline formatting information. I was directed to www.grants.gov, a general web site for all thing government grant related, but this web site did not seem to have any grant format information on it either. 

I recalled that when I was writing my two books, my publisher provided both an instruction document with formatting directions on how manuscript should look and Microsoft Word templates for use. I chose the latter option of just using the templates provided instead of recreating the proverbial wheel to ensure my manuscripts were formatted exactly how my publisher needed them to be, and I had no issues or problems whatsoever either time.

As an expert on supply chain vendor compliance, and the author of the first (and I think still only) book on the topic, one of the consistent points of disruption and avoidable cost is the poor job customer/buying enterprises (e.g. retailers) do in documenting their requirements to their supplier or vendor community. The lack of clarity, the lack of direction, the lack of schematics, the lack of templates, the lack of forethought, the lack of review are all factors in causing confusion to the reader. 

The more confusion, the more delay. The more delay, the more disruption. The more disruption, the more costs incurred to both trading partners. 

This shouldn’t be that difficult. Yet from the private sector to the public sector there are just an increasingly growing number of egregious examples of top-level supply chain partners who are bypassing, skipping over, forgetting, or just plain unaware of these details and how they intrinsically affect the execution of core supply chain initiatives.  

Instead of pointing the finger of failure at those on the receiving end of supply chain specifications and those who are trying to comply, enterprises and entities should take a good long look at the information – or lack thereof – they are providing to their suppliers/vendors and ask themselves whether or not they have done enough to ensure full execution (preferably without further guidance) of their instructions is possible. 

Data analytics does deliver results!

It is not very often that I see the same article published at the same time in multiple magazines, so “Supply Chain Trends Happening Now” by Robert Trent must be quite relevant to appear in both the March 2017 issue of Logistics Management and the March/April issue of Supply Chain Management Review, even though both publications are produced by Peerless Media. 

I certainly found myself agreeing with the trends, the first being that “supply chain talent management is becoming a strategic necessity”; the third stating that “competitive pressures are forcing supply chain managers to become financial managers”; and the fifth which is that “a need to understand and influence event is accelerating the use of predictive analytics”. 

The fifth trend goes hand-in-hand with the second trend which states that “increasing global risk is creating a greater need for supply chain risk management”. Mr. Trent continues that inasmuch as supply chain professionals have not yet agreed on any standard categorization of supply chain risk, one way is to group them as hazard risk, financial risk, operational risk, and strategic risk. 

And how does one analyze risk? Data analytics. 

In the March-April 2017 edition of Supply Chain Brain magazine there is little article that supports the return on investment in data analytics. 

According to a study done in 2016 by Forbes Insights and Ernst & Young who surveyed 1,500 global executives from companies with annual revenues of $500M and greater, of the companies with well-established advanced analytics strategies:

- 66% achieved revenue growth of 15% or more

- 63% reported operating margins of 15% or more

- 60% reported improved risk profiles 

You do not need to be a $500M company to reap the benefits of data analysis. My clients are typically not that large and yet the data analysis work I do for them has high return benefits that they are able to capture in the short-term. You don’t need to begin with spending money on sophisticated data analytics software applications to get started either: you just need to understand your data, ensure it has integrity, and engage the straightforward software tools you have at your disposal to get going. You would be amazed at what popular database and spreadsheet software can do when used together in the right hands. When it comes to data analysis, if you are not doing anything, then doing something productive is better than doing nothing. Start with small projects that have impactful or measurable results. 

Risk management, fraud investigations, operations and manufacturing measures, accounting and sales analysis, and supply chain are just some of the examples of data that can be analyzed in a business environment after being exported from a standard Enterprise Resource Planning (ERP) system. If you are not looking in to your business from a data analytics perspective, then you are not really looking out for your business as a concerned executive or owner. 

Speaking engagements galore! 

The first half of this year has been a hectic one for me as a speaker. My supply chain fraud topic is as popular as ever! It seems that fraud has yet to go out of style, which is rather unfortunate in-and-of itself. So, where have I been? Let’s see. 

I presented at Operations Summit in Pittsburgh in March. This conference is the rebranding and resurrection of the former National Conference on Operations & Fulfillment which I had the opportunity to present at in 2007 on supply chain vendor compliance and in 2009 on supply chain fraud. 

In April traveled just up the road a bit to the Orlando chapter of APICS and presented on supply chain fraud to the nice folks there. The APICS Orlando chapter meets at a country club and the food was absolutely delicious! 

In early June I presented on supply chain fraud to the Florida Gold Coast Alumni Chapter of Alpha Kappa Psi professional business fraternity. This group’s summer Continuing Professional Education series has become an annual speaking engagement for me since 2010. 

Later in June I made my first visit to the great state of Colorado and enjoyed a week in Denver as a return speaker to the national conference of the Institute of Management Accountants. This was the IMA’s 98th annual conference! I previously presented for them in 2015 at their national conference in Los Angeles, also on supply chain fraud. As I did when I traveled to Los Angeles, I stayed for a few extra days after the conference and enjoyed some terrific sightseeing, this time around the local Denver area.  

I don’t only speak on supply chain fraud! I am happy to present on my second book which is about supply chain vendor compliance and how companies can reduce their costs and improve their relationships with their supplier community. And I have a rather engaging (at least I think so) presentation on leadership if your organization would like. 

Or I can talk about how to become a good, non-disruptive, strategic vendor, especially when selling to retailers. 

If there is a topic your organization or association is interested in and you would like me as a speaker, contact me and let me know. If you have an idea for a topic and it is within my area of expertise where I feel comfortable in presenting it, I’ll create the presentation and will be happy to speak on the topic, so feel free to contact me with ideas. 

Spreadsheets on the shop floor.

I found the article titled “Top Five Reasons Spreadsheets Are Dead Weight” in the March 2017 edition of Southeast Manufacturing News (www.mfgnewsweb.com) of interest, even if it was written by the folks at Shop Floor Automations, a company that creates software for shop floor automation. The points made in the article, which I have summarized herein, have validity. Reading the article, I was reminded of the actions of a client of mine who records on paper the production statistics of each job run, e.g. the number of units produced, the job start and stop dates and times of day, and delivers the paper to someone in the accounting department for data entry into the ERP system. 

Not data entry into spreadsheets, but the similarity was nonetheless relevant. 

The article author makes the case that – for companies with sufficient production capabilities (e.g. more than a few machines) – the time spent entering data into spreadsheets is a waste, can be prone to error due to a lack of validation, and the data collected in spreadsheets has limited usability versus the data entered into a proper job scheduling – or I would chime in an ERP – software system. 

Reason 1: No return-on-investment for the time spent on the spreadsheet data entry. This effort is akin to administrative typing and filing. 

Reason 2: Data entry errors require time to revisit, investigate, and correct. I will add that even spreadsheets that use Excel’s data validation feature and attempt to qualify data selections by using VLOOKUP or DGET will be limited in their capability and grow in their complexity. 

Reason 3: Control-F is not the answer. The author’s point is that searching for data is limited if the spreadsheet itself is only used for a limited purpose, e.g. that day’s or that week’s data entry only.

Reason 4: Limited constraint handling. The spreadsheet may not be able to adjust for new jobs or cancelled jobs or machine issues such as bottlenecks. 

Reason 5: Machinists and office clerks are two different positions. As the demand for skilled machinists grows and the supply continues to shrink or remain stagnant, adding clerical duties will make it more difficult for the company to fill the open machinist positions.  Extensive clerical duties also distract from the technical job-at-hand and delay the instant feedback machinists require relating to the job status. 

Spreadsheets have many useful purposes. I love them for what they do and for the data analysis uses and data form uses I have designed and deployed them for. The rational of the article author is sound when it comes to the fact that sometimes, at the right time, companies have to move on during their growth stages and acquire the right software to get the job done. It is no different than using the right tool when working on the job, as any experienced machinist would tell you. 

Is a lack of a structured procurement process a leading indicator of fraud?

An interesting piece in the November 2016 issue of Inbound Logistics magazine caught my attention. The short article titled “Hey, Where Did All This Stuff Come From?” outlines a survey by AmeriQuest Business Services with regards to the procurement process. Based on the results of the survey, procurement professionals informed that:

- 15% do not know which department manages procurement 

- 1 in 5 are not aware of discounts or rebates they could be receiving

- One-third are not sure of who has the final sign-off right to procurement at their company

- More than one-third are not sure how procurement is viewed within their company

- 1 in 5 say their company does not have a procurement process in place 

Of the respondents, 33% state that procurement sits within the Finance department, 22% state that procurement sits within the Operations department, and 7% state that procurement sits within the Information Technology department. Perhaps depending on what is being procured individual departments have authority for the spend below a certain dollar amount in some companies. 

Given the rather unflattering statistics about inconsistently structured procurement processes, I wondered how the procurement or purchasing department fared when it came to fraud. I consulted the 2016 Report To The Nation by the Association of Certified Fraud Examiners. The RTTN is essentially the de-facto detailed analysis of fraud statistics referenced by darn near everyone. 

The purchasing department ranked 7th from the top of 17 departments when it comes to the frequency of frauds, and it ranks 8th out of 17 in terms of the median loss. 

But when the statistics are consolidated by perpetrator department, and the purchasing department is compared to accounting, operations, sales, executive/upper management, customer service, finance, and warehouse/inventory for the variety of schemes, the purchasing department stands out in a significant statistic: it is head-over-heels above all other departments in corruption schemes (68.9%), with executive/upper management taking second place in the corruption race (50.9%). 

I would submit that it would be an interesting research study to merge the two initial surveys and ascertain if corrupt purchasing/procurement departments were the ones where there were a lack of structure, loose organization, and gaps in internal controls. My guess is that there would be some cause and effect. 

Educating employees about cybersecurity would be enlightening. 

No matter how many layers of anti-virus and malware protection software companies use, the chink in the armor will always be people.  When I was a university instructor I would give my students a little lecture on the finer points on how really easy it is to perpetrate a phishing scheme, and they were amazed at just how simple this scam was to execute.  Not that I was teaching them to be cyber-criminals - no! - but I was showing them the connection between data thefts and the ease with which fake emails could be made to look genuine and thus fool some of the people most of the time.  It is just a numbers racket after all. 

The October/November 2016 issue of Government Technology magazine was mostly dedicated to cybersecurity in the public sector. Included in the issue were some statistics from research done by Arlington Research in 2016 on behalf of OneLogin (a company that offers cloud-based identity and access management) and published by InformationWeek. 

> 13% of employees let their co-workers use a device that can access their employer’s network

> 9% of employees let their partners use a device that can access their employer’s network

> 20% of employees share their email passwords

> 12% of employees share their passwords to other applications 

> 20% of employees have no security software on mobile work devices beyond what came with the standard operating system

> Nearly one-half of all employees have no idea of any company policy regarding password sharing

Phishing email scams and tainted USB drives (e.g. those picked up at trade shows) will continue to be used as attempts to penetrate security firewalls and install either viruses and malware or get employees to openly reveal security user identification and password information, whether personal or professional in nature.  

Companies need to ensure their own cybersecurity approach is multi-layered, combining aspects of anti-virus, Internet security, email protection (inbound and outbound), and anti-malware just to name a few components. Ensure your software is always up-to-date, and keep updated as to new products on the market and where your software ranks when annual surveys are done by leading publications. 

Security awareness training needs to be a continual process, not a one-off event, in order to be effective. Cybersecurity software needs to be running continually and updated constantly to be at a ready state to protect. 

Surf safely. The cyber waters are treacherous these days. 

 Is the cure for the stagnant retail model a return to yesteryear? 

As I read the Saturday, November 26, 2016 Miami Herald newspaper, I let out a small sigh of disgust at the article describing how Macy’s website suffered service failures on Black Friday. The article stated that this caused customers and investors to question whether the retailer could handle more online shoppers. 

Macy’s is on track to shut down 100 full-line stores out of a total of 700. JC Penney is in the process of shuttering 140 stores. 

The article continued that websites for Victoria’s Secret (owned by L Brands), Express Inc., and Pier 1 Imports all suffered from errors and slow responsiveness. 

Um … were these retailers not prepared for the online onslaught? I guess not. 

Are stores relevant these days? Do shoppers still want to experience products before they purchase them? Maybe retailers need to bring back some concepts from bygone days to help remake their stagnant stores into the marketplaces they once were. 

In my November 30, 2016 Supply Chain Digest videocast I spoke of the need for department stores to think like marketplaces. Instead of separating into departments, maybe retailers need to divide by age groups and target interests as well. In creating a marketplace experience that attracts families and selected groups, retailers need to allow shoppers to experience new products, get a variety of services they need through partners, and satisfy finicky cravings all via an updated business model. Remember the days when the department store was the one place to go for all of your shopping needs, eyecare, a haircut, auto services, something to eat, and you could even purchase concert tickets? 

Instead of building restaurants and lunch counters, try inviting food trucks into the parking lots. Get new and innovative products constantly moving into the store and using social media to publicize this to targeted audiences. Focus on what you cannot do online: touch, feel, and experience the products. Allow local and regional store management the flexibility to work with local and regional product manufacturers who can bring innovative (albeit vetted) items into stores the same way as companies are working with locally sourced agricultural product producers. Partner with entertainment companies who can send costumed characters to be on-site for the children and get them engaged in reading, making, coloring, and creating. 

In shifting the business model from that of the department store to that of the marketplace, retailers just may have a chance to survive and thrive in the new world order and regain a relevance to their brick-and-mortar stores in the age of the Internet. 

To view my Supply Chain Digest videocast, get a copy of my groundbreaking book, or learn more about the relevance of supply chain vendor compliance, start by going to www.vendorcompliance.info. 

Retailers not very invested in vendors?

I want to be very careful that I do not misinterpret any statistics, so it is beneficial that I begin with this disclaimer. However, the survey results from the November-December 2016 issue of Innovative Retail Technologies (www.innovativeretailtechnologies.com) magazine do appear rather self-explanatory in their meaning. While the article does not state how many retailers were surveyed, the variety of retailers included those representing specialty apparel, big-box retail, and grocery.

The survey question “In 2017, what supply chain / logistics solutions will your company invest in?” garnered the following responses reordered in high to low order:

- Inventory Management Visibility: 37% 

- Price Management: 26%

- Warehouse Management: 25%

- Radio Frequency Identification: 24%

- Order Management / Fulfillment: 23%

- Shipping Solutions: 23%

- Sourcing: 20%

- Returns Management: 17%

- Electronic Data Interchange (EDI): 17%

- Vendor Compliance: 16%

- Mobile for Distribution Center Associates: 14%

(Note that Mobile Devices for in-store Associates was the #1 priority for in-store hardware investments at 37%.)

In the above list, EDI and Vendor Compliance investments rank just above the bottom of the list. 

With all of the complaining and frustrations spouted by retailers about under-performing supply chains and disruptive vendors, I find it quite curious that retailers are committing so very little towards improving their supply chain relationships with their vendor community. The survey noted the focus on inventory visibility and customer-relationship management initiatives and technologies which is all well and good and fine. But without solid vendor relationships as the driving force, no amount of visibility or customer relationship is going to help. 

Granted, EDI has been around for several decades now, so maybe the need for continued advanced investment is declining and retailers are more in maintenance mode. However, I can state from my own experience in helping numerous vendors that retailers are doing an exceptionally poor job in writing their specifications clearly and sticking to the standards. By passing problems to the vendor community it compounds confusion many times over. It is no wonder that vendors are struggling and supply chains are suffering delays and disruptions. The results are higher-than-should-be costs to run and manage supply chains by both customer and vendor alike.

Retailers need to strengthen their relationships with their vendors which starts with a self-examination of what they – the retailers – are doing wrong as lead partners in this relationship, which is plenty.

To order a copy of my groundbreaking book, “Successful Supply Chain Vendor Compliance”, to view my November 30, 2016 videocast by Supply Chain Digest, to read book reviews by supply chain magazines, or to learn more, just start by going to www.vendorcompliance.info. 

Security in the age of the Internet of Things

The holiday season is behind us and with the start of a new year everyone is just beginning to enjoy their new gadgets, from baby monitors to video doorbells to interconnected thermostats and other household appliances. But before you get too comfortable, you might want to keep reading as I refer to the October 2016 Reality Check editorial in Business Solutions magazine (www.bsminfo.com). 

There are an increasing number of cybersecurity threats being hatched and launched on a daily basis. Webroot, a threat and security software and services company, informs that 6,000 new phishing sources, 80,000 new computer malware applications, and 51,000 new mobile malware applications are discovered by the company every day. Yahoo, used more by the older and less technology savvy folks, is the primary site to be spoofed for phishing, and Wells Fargo has overtaken PayPal as the most spoofed financial site. According to Brian Fonseca, director of the Jack D. Gordon Institute for Public Policy at Florida International University’s Steven J. Green School of International and Public Affairs, the global cost of cyber-attacks is anticipated to grow from the current $400 billion today to a projected $2.1 trillion by 2020.

Ransomware is a growing problem, but the payments are increasing as criminals are no longer satisfied with ransoms of just a few hundred dollars. Different data has different value, e.g. healthcare data has a higher street value than other data. 

Gartner estimated that 6.5 billion “things” could be connected to the Internet in 2016, and that number could jump to between 20 and 34 billion by 2020 depending on whose estimates you choose to believe. That is a whole lotta things. 

And to mass market those things, some manufacturers have been a little lapse on the security side. Previous stories of how easy it was to hack baby monitors have been around for a while. But consider what a hacker could do with control of a thermostat or other household device: instead of requesting just a monetary ransom while keeping the environment the device is managing stable, the criminal could alter the environment having taken over the device. Imagine having your home’s thermostat set to 98 degrees or your refrigerator and freezer being set to high temperatures, spoiling your food until the ransom is paid. What is your recourse to ensure the criminal does not repeat the offense after the ransom is paid: to change out the unsecure appliances? Will the appliance warranties cover these security breaches? 

I am very happy with my programmable thermostat and disconnected appliances that are off the grid, seeing no reason whatsoever to be so connected to my house that I need to know what my appliances are up to in my absence. While this might make for a funny animated movie, there is nothing funny about a criminal hijacking a home and doing untold disrupting damage until a ransom is paid, perhaps over and over again.