In preparation for next month’s June 28 release of Robert A. Rudzki and Robert J. Trent’s Next Level Supply Management Excellence: Your Straight to the Bottom Line Roadmap, we’re going to do a formal review of Bob & Doug’s (& Michael & Shelley’s) classic Straight to the Bottom Line: An Executive’s Roadmap to World Class Supply Management. Even if you have read it, now would be a good time to read it again to make sure you’re well versed in all of the foundations before starting your Next Level Supply Management journey.
The classic text starts with an overview of the opportunity available to those organizations willing to embark on a Supply Management journey. Packed with success stories, including that of a 40B Manufacturer who saved 1B over three years with a modest investment of 20M, of Xerox and how it slashed produt development time by a year and manufacturing costs by 50% by including suppliers strategically in design, and of Lucent and how it achieved 20% year-to-year price savings when it needed them most, the underlying theme is that supply chain management can play a significant role in profitability.
In addition to describing the great opportunity that Supply Management offers an organization, the first chapter also does a great job in defining the new role for Purchasing in a modern supply management focussed organization and the benefits that can be achieved. Some of the key changes and benefits are:
Before diving into the basic roadmap, the authors state that an organization must first understand where it is before it can define the roadmap to where it is going. And the organization should start by asking some important questions, which the authors define as follows:
- Are supply chain goals integrated into the strategic plan of the business?
- Does the chief executive know who the chief purchasing professional is?
- What is the relationship of the chief purchasing professional to the chief executive?
- Does the procurement team have top- and bottom-line objectives?
- What percentage of external spend is supervised by purchasing and covered by a written strategic sourcing plan?
- What percentage of spend is leveraged through internal spend pools?
- Does the organization have the right leadership in the Procurement function.
- What is the working relationship between Procurement professionals and those in other disciplines?
- What are the opportunities available to Purchasing professionals for training and improvement?
- What is the chief executive’s personal commitment to achieving improved corporate performance through a best-in-class Procurement organization?
There are right answers and wrong answers to each of these questions. Before an organization can truly begin it’s journey, it must have the right answers to most, if not all, of these questions. Otherwise it won’t have what it takes to move up the Procurement maturity curve. And an organization does want to be best-in-class because best-in-class organizations see the following transformations:
|Little/No Strategic Sourcing||100% of Sourcing Covered by Written Sourcing Plans|
|Spreadsheet Analysis||Optimization Analysis|
|Defect Rates > 40K PPM||Six Sigma Quality|
|On Time Delivery (OTD) of 65% to 90%||Optimized OTD|
|Prices Rise 3% to 5% Annually||Costs Drop 5% to 7% Annually|
And these benefits just scratch the surface. For more benefits, more success stories, more insights, and the right answers to the above questions, check out Bob & Doug’s (& Michael & Shelley’s) classic Straight to the Bottom Line while you wait for Robert A. Rudzki and Robert J. Trent’s follow-up on Next Level Supply Management Excellence.