Late last year, CAPS Research released a report on Supply Strategy Implementation: Current State and Future Opportunities 2009 that was based on data from 130 supply organizations across 26 industries. In this survey, the respondents rated the overall importance and implementation importance of 23 different strategies. The results are a little scary: the six lowest rated strategies (where the lowest rated strategy is deemed to be only 77% as important as the highest rated strategy) are the strategies that should be given the highest importance. While the following six strategies, that were ranked highest, are arguably important:
- Vision, Mission and the Strategic Plan
- Commodity & Supplier Strategy Process
- Strategic Cost Management
- Engagement by Corporate Executives & Business Unit Leaders
- Human Resource Development
- Procurement & Supply Organization Structure & Governance
not a single one addresses how you will actually contain costs during a sourcing project. While each of these organizational enablers will improve the capabilities and efficiency of your team, they don’t address the proper way to tackle strategic or high opportunity categories. What’s needed are the following six strategies, which were, unfortunately, ranked lowest:
- Collaborative Buyer/Supplier Development & Continuous Improvement
Collaboration will enable the identification of additional opportunities.
- Standardization of Systems, Components & Processes
Standardizing on parts reduces category management complexity and associated costs.
- E-Sourcing & Supply Chain Strategies
This is where the cost savings really kick in. A well executed e-sourcing project will generally save between 5% and 15% above and beyond what will be obtained with traditional methods. And if advanced techniques, like strategic sourcing decision optimization, are applied, you’ll save an additional 12%, on average. Plus, a well defined supply chain strategy will generally deliver better results than a project undertaken without a strategy.
- Strategic Insourcing/Outsourcing
Identifying those categories you are best equipped to handle and those categories that you are least equipped to handle can result in significant cost reductions as you will be able to outsource those categories you are least equipped to handle to specialists.
- Environmentally Sustainable Supply Chain Management
The times they are a changing’ and you have to be green to save green. Seriously. Run afoul of regulations or ignore your social responsibility, and your supply chain financial statements will soon be covered with red.
- Supplier Integration into Customer Order Fulfillment
A business exists to serve its customers. Integrating the supply chain end-to-end will improve service levels while decreasing associated costs.
So rethink your strategies — and maybe you’ll see your bottom line improve.