Daily Archives: June 21, 2011

Ariba Vision 2020: Close, But No Cigar

This post addresses the four predictions that came close to the mark in Ariba’s Vision 2020 – The Future of Procurement report. For the most part, they were just a little too hopeful.

02. Intelligence moves into context

Intelligence will move into context, and be front and center in leading supply management organizations, but will not be a substitute for Supply Management Professionals with expertise in risk and economics and target markets. Just like a dashboard can only alert a user to a known issue, automated monitoring solutions can only alert a user to known risk indicators. Political uprisings, natural disasters, and financial failures (due to a loss of one or more major contracts when a supplier is operating on razor thin margins) can still come without any obvious warnings and only a sourcing professional who is carefully monitoring the country, the news, and the supplier will be able to detect a significant event before, or, in the worst case, as soon as it begins.

06. Prices go transparent

Price transparency will continue to increase to the point where most prices for most products and services will be known to within a few points most of the time, but there will be limitations in accuracy, just like there will be limitations in systems’ ability to predict risk and market changes. Unexpected natural disasters, political uprisings, enthusiastic traders, and government intervention will still create unexpected (artificial) supply shortages that materialize over night and wreak havoc on prices. In addition, shifts in consumer preference, organizational boycots, and new regulations will contribute to rapid demand decreases that will do the same.

11. SBUs absorb procurement

Strategic Business Lines will absorb most day to day Procurement and Supply Management functions, leaving the Supply Management organization to focus on strategic initiatives, long-term value generation, innovation, and business line consulting when and where it is needed. And tactical procurement functions might entirely disappear from procurement, being handled by service centers that support the various business lines. But Supply Management will still be needed to not only deal with strategic initiatives, but to handle special projects and unexpected situations when they arise. Since the strategic business lines will never by Supply Management experts, they will never truly absorb all of the Supply Management functions.

25. Early is the new black

Suppliers will be more heavily involved in NPD and will be involed earlier in the process, but it won’t always be on the ground floor. Suppliers have limited resources too and dragging them in to every project before the supply management professional has identified the value they can bring and the value they stand to receive will only result in strained relations. They’ll be brought in when the supply management organization feels the time is right, but it won’t always be early as that will be too speculative, and, in some cases, risky.

Close, But No Cigar

The next post will discuss the four predictions that were totally off base.

If You Have to Hire, Maybe You Should Hire At Home (Bonus NPX Take Away 2)

Yes, the doctor is back on his home-sourcing horse, but there are good reasons. It’s now literally cheaper to “off-shore” in Oklahoma, Alabama, and Michigan than to go to Maharastra, Andhra Pradesh, or Rajasthan. At both the Hackett Group Conference and the NPX gathering put on by The Mpower Group, I heard a number of top executives from Fortune 500 companies note how it was cheaper to bring certain operations and services back home than keep them in India where labor rates are still increasing in the double-digits year after year.

And if this isn’t enough to convince you, this fact should really make you think twice. Not only are American companies hiring at home, but now Indian companies are hiring American citizens on American soil to fulfill the outsourcing contracts granted to them by American companies. And this is happening in Procurement, Finance, and Legal. That’s right! There are so many unemployed lawyers now that it’s cheaper for Indian firms to hire unemployed American lawyers than to try and recruit lawyers that know American law because they are few and far between, in great demand in India outsourcing shops, and command ever increasing salaries.

So hire at home before India (and, in short order, China) scoop up all your talent!