Daily Archives: October 20, 2009

The Three-Pronged Core of the Modern Supply Chain

A recent article over on Supply Chain Digest purported to tackle supply chain at the core. I thought it would be about the core of the supply chain, but instead it was about how the supply chain is now the core of most companies. For example, GM just attributed it’s 7% increase in gross margins to manufacturing & distribution (supply chain), a 2B consumer goods company has realized that their supply chain is the key to their success, and the lack of supply chain sophistication is what allows private-equity firm Frontenac to buy companies at a discount and make profitable ventures out of them (by installing proper supply chains and supply chain management).

I was curious as to what they’d say about the core of a modern supply chain. A Google search for “supply chain core” turns up core disciplines, planning and optimization, and lean six sigma, which, while important, all miss the point. Which is very simple.

The three-pronged core of the modern supply chain is the same as it’s always been — people, process, and platform. The only difference is that the people are more skilled, the processes are more involved due to the truly global nature of the modern supply chain, and the modern platform is a sophisticated tangle of modern technology. But the core is still the same — good people, good processes, and good platform. Everything else is just a layer.

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Charles Dominick on “Are You Prepared”

Today’s post is from Charles Dominick of Next Level Purchasing (and the SPSM certification) and blogmaster of the Purchasing Certification Blog.

I can’t recall a time in my procurement career when business conditions so strongly indicated that changes were a–coming. The latest United States GDP report indicated that the economic freefall has subsided, likely giving businesses the confidence necessary to resume the spending that will fuel growth. The last several US unemployment reports indicate that, while unemployment is still high at 9.8%, things aren’t getting worse by the minute the way that they were earlier in the year. And, after a period where commodities posted month–to–month price declines in seven of eight consecutive months, stability has prevailed and inflation has begun.

All of these indicators should be writing on the wall for today’s chief procurement officers: changes and challenges are ahead. Are you prepared?

What kind of challenges, you ask?

Consider these:

1. Heavier Workload.
As your company forecasts — and invests in marketing to create — demand for 2010, there will be a higher volume of inputs needed to support the higher volume of outputs. So procurement activity will increase. With a 9.8% unemployment rate in the US, this recession has claimed its fair share of procurement jobs. So, if you’re doing more with less now, you’re going to either have to find a way to squeeze more productivity out of your current (possibly depleted) team or add new staff —- new staff that will have to get up to speed very, very quickly.

2. Staff Will Leave.
As you contemplate having your existing staff handle the heavier workload, have you considered the possibility that some of those people may not be around for you to delegate to? Very, very few good employees will voluntarily leave a company during a bad recession. They know the risk of doing so. But as the economy thaws out and heats up, more opportunities will present themselves. Those employees that were unhappy but stuck with the company because of fear will finally feel ready to move on to greener pastures. You may find yourself trying to fill positions that you didn’t count on having vacated.

3. Price Increases.
There will so much upward pressure on price, it’s not funny. First, every year, suppliers come out with their new pricing in January. January is always a convenient excuse for raising prices. January is right around the corner. Second, commodity prices are on the rise, so prices for most goods tend to follow. Third, because of the nasty effects of the recession, some suppliers are so financially weak that their choices are to either raise prices to cover their losses or die. Fourth, it’s basic economics that as demand picks up, prices go up until supply adjusts to keep things in balance. With such a long economic dry spell, businesses are antsy to quit hunkering down already. Demand will go up, pushing prices up.

So, you may very well find yourself with a heavier workload, fewer long-time employees, more newer employees, and suppliers shoving higher prices down your throat. Because of the line of business that I am in, I know one solution that will help employees be more productive, get new employees to deliver results more quickly, boost the morale of existing employees, and provide your team with the skills necessary to combat price increases. But there are other solutions and this post is not a sales pitch so I won’t even go into what that solution is.

What I do want to do is just to share what I foresee in the immediate future for procurement leaders so that you can be prepared for these challenges with the solution(s) of your choice. With proper preparation, you can be ahead of this wave of change and succeed while other, less prepared peers of yours struggle to keep their proverbial heads above water.

Thanks, Charles!

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