Daily Archives: August 5, 2012

What the Heck is a Supplier SuperCycle?

A recent post over on Procurement Leaders chronicled the results of July’s Procurement Intentions Index graphs that record changes in CPO strategy intentions over time, based on a survey of their CPO panel. According to the post, their results show the clear intention of CPOs to consolidate their supply chains by reducing the number of suppliers they work with, while, at the same time, spending more time collaborating with those that remain.

Based on these results, the author believes that the supplier collaboration and consolidation results are part of a “super-cycle” and that we will see the Index positions of both of these remain broadly the same for months if not years to come. That is until future CPOs believe they have reached the perfect number of suppliers and want to increase price competitiveness by taking more on board.

I don’t get it. I do agree that a subset of Supply Management organizations will be focussed on supply base consolidation and that a further subset of these will be focussed on collaboration in the hopes of mutual innovation, but I don’t think this is a super-cycle. A supercycle is a long period, or wave, in the growth of a market, as described by the Elliott Wave Principle. By definition, a super-cycle has to be market wide, and include all Supply Management organizations in all stages of maturity, not just the ones that are smart enough to be involved with a leading Procurement organization and respond to their surveys. While I do think that this is a mini-cycle in the above-average supply management organizations moving towards best-in-class status, most below-average organizations are still focussed on cost-reduction at any cost (to justify further investments in technology and transitions to better processes), and this typically involves auctions and negotiations that open up the procurement process to new bidders in hopes of getting more-cost effective, or higher-quality suppliers, for the organization.

This does mean that, as some organizations advance up the maturity curve, the mini-cycle will repeat, but then, as the post points out, the organizations that have optimized their supply-base will begin to open it up to new suppliers in an attempt to get even more value. Thus, if there was a super-cycle, it would be an oscillating contraction/expansion cycle that would emulate the cyclic cosmological model — an infinite contract/expand loop.

Diverging thoughts?