Daily Archives: October 14, 2011

High Tech Needs Next Generation Supply Management

As chronicled in this recent commentary by Bob Ferrari over on Supply Chain Matters, not only do accelerating dynamics reshaping high tech supply chain networks bring implications, but there is continuing turbulence among and across high tech and consumer electronics value-chains. This means that now more than ever, firms in these segments need to continually re-visit their strategic sourcing and supply plans for long-term implications and, in SI’s view, they need to start by adopting next level supply management strategies when they revisit their plans.

And, as Bob suggests, it is imperative that senior management is continually educated to developments and that strategic strategy sessions and interchange be more than just a periodic occurrence. As clearly indicated in this morning’s post, Next Level Supply Management requires Collaboration, Stakeholder Partnership, Leadership, Early Involvement, and Alignment. Not only does Supply Management need to speak as one voice, but the entire company needs to speak as one voice in this sector. The storm is too violent to ride out if everyone is rowing in different directions.

Knowledge Based Sourcing V – The Verdict

This week examined Knowledge Based Sourcing, Booz Allen’s entrant into the Next Level Arena. Described as a competency consisting of a set of powerful techniques used to identify high impact value drivers that result in increased understanding and knowledge of ‘ideal’ cost structures that can be used to develop better relationships with suppliers, focused on reality based improvement plans, and gain an ongoing business advantage, KBS turns out to be a sourcing paradigm largely based on advanced cost modelling and associated analytical techniques.

Since advanced cost modelling is a solid foundation for both strategic sourcing decision optimization and spend analysis, KBS is a good foundation for any sourcing effort, but does it go far enough to truly be a next level supply management paradigm? Let’s look at some of the key tenets of the other entrants into the Arena.

  • High Definition Sourcing (HDS)
    Category Excellence. Adoption. Stakeholder Partnership. Decision Monitoring. BI Focus.
  • Value Focussed Supply (VFS)
    Working Capital Optimization. Revenue Enhancement. Corporate Reputation Protection. Increased Supplier/Customer/Stakeholder Loyalty. Strategic Advantage. Intellectual Capital. Sustainable Value Chain.
  • Next Level Supply Management (NLSM)
    Leadership. Transformation. Corporate Finance Focus. Talent Management. Collaboration. Energy Management. Idealized Design. (Lean) Supplier Development. Complexity Reduction. Working Capital Management. Early Involvement.
  • Next Practices (NP)
    Talent Management. Adoption. Execution. Implementation. Optimization. Utilization. Customer Value Focus. Risk Focus. Mind Share. Information. Alignment.
  • Supply Management Transformation (SMT)
  • Supply Chain Leverage (SCL)
    Value Creation Framework. Market share. Diversification. Productivity. Tax Effectiveness. Demand Management. Lean.

Hmmm. While most of these start with a foundation of modelling and cost management, that’s as far as the similarity goes. In most of these models, modelling to understand current costs is simply the first step on the path to category excellence, revenue enhancement, working capital optimization, or customer value improvement. It is not an end in and of itself. Furthermore, most of these next generation methodologies start with TVM (Total Value Management), realizing that TCO doesn’t go far enough for most categories — and KBS seems quite content with TCO.

Verdict? While KBS might last a few rounds against SMT, against HDS, VFS, NLSM, NP, and SCL, it wouldn’t last three rounds before getting KO’d. I guess it’s time for Booz Allen to update their model!